Final Meal Tax Guidance Issued by DRS

After immense political pressure to change the guidance that was issued by the Department of Revenue Services (DRS) in early September on a new 1% tax on "prepared meals", the department revoked their previous guidance and issued a new policy statement to help convenience stores determine what items it should apply to. DRS's legal department recently told CEMA that our members "should apply the 1% increase to the list of taxable meals set forth in PS 2002(2). That list includes prepackaged snack foods of less than five ounces, fountain drinks, and bottled drinks sold in containers of 16 fluid ounces or less, unless sold in prepackaged multi-unit packs. For your members, October 1, 2019, should essentially mean a change to the 7.35% rate."

Below are the items outlined in PS 2002(2) that the new 1% prepared meal tax (7.35% of total tax) applies to:
  • Coffee or tea (ready to consume, hot or iced);
  • Sandwiches and grinders;
  • Popsicles, ice cream cones, cups, sundaes, and other individual servings of frozen desserts unless sold in factory prepackaged multi-unit packs;
  • Ice cream, frozen yogurt, and other frozen desserts sold in containers of less than one pint;
  • Yogurt sold in containers of eight ounces or less unless sold in factory prepackaged multi-unit packs;
  • Fountain drinks, shakes, and syrup-flavored crushed ice drinks;
  • Bottled or canned fruit juices and drinks, containers of milk, and non-carbonated mineral or spring water sold in containers of 16 fluid ounces or less unless sold in prepackaged multi-unit packs;
  • Salads sold at salad bars;
  • Salads sold in containers of less than eight ounces;
  • Donuts, muffins, rolls, bagels, and pastries (five or fewer);
  • Cookies sold loose that retailers place in containers for customers (five or fewer when cookies are sold by quantity or less than eight ounces when cookies are sold by weight);
  • Pies or cakes by the slice;
  • Prepackaged or factory-sealed bags or packages of five ounces or less of chips, popcorn, nuts, trail mix, crackers, cookies, snack cakes, or other snack foods;
  • Single pieces of fruit;
  • Pizza, whole or by the slice;
  • Cooked chicken sold by the piece, including "buckets" of chicken, and whole cooked chickens;
  • Ribs sold by the piece or portion and whole racks of ribs;
  • Items such as salads, side dishes, and rolls, when sold as part of "family pack" meals including, typically, whole chickens or buckets of chicken, even when the items exceed the weight or quantity limits specified above.
Click here to see the full guidance document.