Overview of Common Sales Tax Audits
Our most common sales tax audit pertains to:
- Grocery stores
- Convenience stores
- Gas stations
Food and alcohol are high-volume sales that are common and bring in sales tax dollars for the state.
Definition of “Food”
“Food” means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.
Exclusions from the Definition of Food
“Food” does not include:
- Alcoholic beverages
- Dietary supplements
- Soft drinks
- Tobacco
Beverages That Qualify as Food
Beverages that do qualify as food include:
- Milk or milk products
- Soy, rice, or similar milk substitutes
- Items containing greater than 50% vegetable or fruit juice by volume
Sales Tax for Catering Services
When you enter the realm of catering, sales tax requirements change.
You are required to collect and remit sales tax on all sales including rentals, except for sales of food for consumption off the premises where sold.
Examples
Catering at Your Facility
If you are catering a wedding at your facility, you must collect and remit sales tax on:
Sale of food and beverages
Rental of items such as:
- Chairs
- Tables
- Dishware
- Stemware
- Silverware
- Napkins
- Tablecloths
- Silk flowers
Catering at an Outside Facility
If you are catering a wedding at a facility arranged by the wedding party (not your facility or one arranged by you), you must collect and remit sales tax on:
- All beverage sales (soda, beer, wine, mixed drinks, etc.)
- All rental items
However, you would not be required to collect tax on the sale of food, since it is consumed off the premises where sold.
Sales Tax Exemptions
You are entitled to claim exemption on:
- All items purchased for “resale”, including:
- Food
- Beverages
- Rental items
If you are licensed to conduct a food service operation pursuant to section 3732.03 of the Ohio Revised Code, you are also entitled to claim exemption on:
- Items primarily used directly in preparing and preserving food for human consumption for sale
This does not include items used to display food for consumer selection.
- Items used to clean those used to prepare or preserve food for sale
Frequently Asked Questions
What types of businesses are most commonly subject to sales tax audits?
Grocery stores, convenience stores, and gas stations are frequently audited due to their high-volume sales of food and alcohol, which generate significant sales tax revenue for the state.
What is excluded from the definition of “food” for sales tax purposes?
Items such as alcoholic beverages, dietary supplements, soft drinks, and tobacco are excluded from the definition of food and are not eligible for certain tax exemptions.
Are all beverages considered food for sales tax purposes?
No. Only beverages like milk and milk substitutes, as well as those containing more than 50% vegetable or fruit juice by volume, qualify as food. Other beverages may be taxed differently.
Do catering services always require collecting sales tax?
Yes, but the specifics depend on the catering location. If catering occurs at your facility, tax must be collected on all sales including rentals and food. If at an outside venue not arranged by you, tax is collected on beverages and rentals, but not on food consumed off-premises.
What purchases are exempt from sales tax for food service operators?
Licensed food service operators may claim exemptions on purchases for resale, such as food, beverages, and rental items, as well as items primarily used in preparing or preserving food. Display and cleaning items are generally not exempt unless used in food preparation.