If you are a convenience store, restaurant, or bar owner in Indiana, then you should know how food and beverages are taxed.
A local food and beverage tax rate in Indiana is typically 1% of the gross retail income received from taxable food and beverage transactions. However, when both a county and a municipality located within that county have imposed a food and beverage tax, the rate is 2% in the municipality.
Taxable Transactions
Localities that have adopted the food and beverage tax apply it whenever:
“Food or beverage is furnished, prepared, or served by a retail merchant for consumption at a location or on equipment provided by the retail merchant….”
Definition of “For Consumption at a Location or on Equipment Provided by the Retail Merchant”
This applies when:
Food or drink is served by a retail merchant off the merchant’s premises
Food or drink is sold in a heated state or is heated by a retail merchant
Food or drink is made of two or more food ingredients, mixed or combined by a retail merchant for sale as a single item
(Other than food that is only cut, repackaged, or pasteurized by the seller and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the federal Food and Drug Administration)
Food sold with eating utensils provided by the retail merchant
Eating utensils include plates, cups, napkins, and straws
Does not include containers or packages used to transport food
Special Cases
Catering activities are subject to the tax
Food sold at deli counters in grocery stores is also taxed
Exemptions
The following are not subject to the food and beverage tax:
Food that is only cut, repackaged, or pasteurized by the seller
Sales of eggs, fish, meat, and poultry that require cooking by the consumer
Relationship to Sales Tax
The food and beverage tax is similar to a sales tax:
It is “imposed, paid and collected in the same manner as the sales tax”
Food that is exempt from the state sales tax must also be exempt from the food and beverage tax
Retailers must use different returns for sales tax and the food and beverage tax
Frequently Asked Questions
What is the food and beverage tax rate in Indiana?
The standard local food and beverage tax rate in Indiana is 1%. However, if both a county and a municipality within that county impose the tax, the rate increases to 2% within the municipality.
Who is required to collect the food and beverage tax?
Retail merchants such as restaurants, bars, and convenience stores must collect the tax when they furnish, prepare, or serve food or beverages for consumption at a location or with equipment they provide.
What types of food are considered taxable under this law?
Taxable items include heated food, food made of multiple ingredients sold as a single item, and food served with utensils such as napkins, plates, or straws. Catering services and deli counter sales in grocery stores are also taxable.
Are any foods exempt from the food and beverage tax?
Yes. Exemptions include food that is only cut, repackaged, or pasteurized by the seller, as well as raw eggs, meat, poultry, and fish that require cooking by the consumer.
How does the food and beverage tax relate to Indiana’s sales tax?
The food and beverage tax is administered in the same manner as Indiana’s sales tax. If a food item is exempt from the state sales tax, it is also exempt from the food and beverage tax. However, retailers must file separate returns for each tax.
