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Grocery Stores

Revised 09/2013

Table of Contents

I. Introduction

II. What Is Taxable at Grocery and Convenience Stores?
Examples of Taxable Items; Food Sold for Immediate Consumption; Photo Processing; Rentals of Tangible Personal Property; Cigarettes and Tobacco Products; Newspapers; Phone Cards; Over-the-Counter Drugs and Medicines

III. Methods of Tax Determination
Cash Register Keys; Computer-Generated Sales Registers; Retail Inventory Method; Gross Profit Method (Shelf Test); Estimated Taxable Percentage

IV. Special Reporting Methods
Method B - Purchase Ratio Method; Method C - 15% of Gross Sales; Audit Procedure - 15% Method; Method E - Commingled Receipts

V. Miscellaneous Grocery Store Topics
5% Audit Allowance; Actual Substantiated Losses; Penalty and Interest Application; Allowance for Bad Debts; Consignment and Commission Sales; Coupons and Premiums; Trading Stamps; Vending Machine Sales; Soft Drink Returnable Bottle Deposits; Items Purchased by Customers with Food Stamps / Lone Star Card; Combination Grocery and Snack Bar or Delicatessen; Items Withdrawn from Inventory for Use; Wrapping and Packaging Supplies

VI. Auditing Procedures
Purchase Ratio Method, Exhibit - Transaction Entry; Markup Methods; Lack of Taxpayer Records, Exhibit - Letter to Vendor, Exhibit - Vendor's Records; Beer, Wine & Tobacco Vendor Data; Alternative Markup Factors

VII. Grocery Store Audit Checklist
Gross Sales; Taxable Sales; Selection of Test Periods; Examination of Records; Sampling/Estimation Issues

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