Ohio Sales And Use Tax: Should Food Service Operators Discard Their Separate Beverage Coolers?
The Ohio Department of Taxation (“Department”) recently published an Information Release concerning the Ohio sales and use tax exemption under R.C. 5739.02(B)(27) for persons licensed to conduct food service operations. Under this exemption, personal property primarily used for any of the following is exempt from tax: 1) to prepare food for human consumption, 2) to preserve food that has been or will be prepared for human consumption, except property used to display food for selection by the customer, and 3) to clean tangible personal property used to prepare or serve food for human consumption for sale. Further, the Department also released a helpful reference guide to assist food service operators in determining if their purchases are exempt from Ohio sales and use tax.
If the property is used for both an exempt and taxable purpose, its primary use determines whether the property is entitled to the applicable exemption. As we understand, many food service operators have one cooler (or more) for food items and a separate cooler for beverages. Since beverages such as soda pop, beer and wine are not considered “food”, the separate beverage cooler and related equipment would not be exempt, while the cooler primarily used to store food would be exempt. Alternatively, if the food service operator split the use of its coolers, such that each cooler’s storage capacity was allocated at least 51% to “food” items, then both coolers would be exempt from Ohio sales and use tax.
Keep in mind, other general sales and use tax exemptions, such as the resale, manufacturing and packaging exemptions, may also be applicable to a food service operator. If you are a food service operator in need of help in determining which of your purchases are exempt from Ohio sales and use tax, please feel free to contact us.