Indiana Sales Tax Audit
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 tax food and beverage tax applies 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….”
“For consumption at a location or on equipment provided by the retail merchant” is defined as:
- When food or drink is served by a retail merchant off the merchant’s premises;
- When food or drink is sold in a heated state or is heated by a retail merchant;
- When 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); or
- Food sold with eating utensils provided by the retail merchant. Eating utensils include plates, cups, napkins and straws but not containers or packages used to transport food.
Catering activities are subject to the tax, as is food sold at deli counters in grocery stores.
Food that is only cut, repackaged or pasteurized by the seller is not subject to the food and beverages tax, nor are sales of eggs, fish, meat and poultry that require cooking by the consumer.
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,” and food that is exempt from the state sales tax must also be exempt from the food and beverage tax. However, retailers must use different returns for sales tax and the food and beverage tax.
Indiana Sales Tax Audit