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Illinois sales tax on grocery items

By May 22, 2016November 16th, 2019Illinois Sales Tax, Uncategorized

Illinois sales tax on grocery items
Although grocery items are tax exempt in most states, this does not apply to you if you live in Illinois.  Grocery items are not tax exempt, but they are taxable at a reduced rate of 1%. Candy, soft drinks, alcoholic beverages, and food prepared for immediate consumption do not qualify for the 1% rate.
If you are a business owner undergoing a sales tax audit of your grocery store, call our office to get a better understanding of your Illinois sales tax collection obligations. For one, you do not have any fully exempt items. Secondly, you do not want the auditor to look through your books and records and take the low tax items at 1% and recategorize them as all high tax. This is very likely from our experiences. For example, if you have a grocery store, but you sell alcohol, make sure that you do not use the 1% low tax on your alcohol. The liability here is the difference in the sales tax plus penalties plus statutory interest.
The Illinois Department of Revenue has issued a letter ruling that clarifies which rate of tax should be used by a bakery that sells both food which has been prepared for immediate consumption and grocery-type items and also provides facilities for on-premises consumption. Bakery items prepared by the bakery can be taxed at the lower rate if the area for on-premises consumption is physically separated or otherwise distinguishable from the area where food not for immediate consumption is sold and the retailer has a separate means of recording and accounting for collection of receipts from sales of both high and low rate foods.
The Department generally defines “physically separated” as separated or divided by a tangible barrier. An eat-in-area that is partially isolated from the general sales area of a store by the arrangement of display cases, service counters, or stub walls would qualify as “physically separated.” The second factor, separate means of recording and accounting for collection, would include cash registers that separately identify high rate and low rate sales, separate cash registers, or any other method by which the tax on high and low rate sales are recorded at the time of collection.
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Illinois sales tax on grocery items

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