Taxing Matters: Catering vs. Delivery - What You Need to Know

In a previous article, we talked about the difference in how sales tax and meals taxes apply to the same items, as well as how taxability may hinge on many factors such as product ingredient, availability of utensils, seller type, and gross sales of the retailer. This month, we're going to add a few more taxability considerations to the list, such as, place of consumption, catering and delivery of food.

Was the food made to be eaten on or off premise?
The place of consumption is key.

Let's look at this in light of a few examples. For example, Ohio, like nearly all states, imposes sales tax on the sale of prepared food. It has also adopted the Streamlined Sales Tax definition of prepared food which includes l) food sold in a heated state or that is heated by the seller, 2) two or more food ingredients mixed or combined by the seller for sale as a single item, or 3) food sold with eating utensils provided by the seller.

Since there is no distinction within the taxable definition of prepared food as to whether the food is to be consumed on or off-premise, it would at first glance appear clear that hot food, combined foods, or foods sold with utensils from a restaurant would be subject to sales tax whether for on or off-premise consumption. If you stopped here, however, that would be a mistake.

The Ohio Constitution prohibits the taxing of any "food," as statutorily defined, sold for consumption off the premises of where it was purchased. Since they do not exclude "prepared food" from their definition of "food," this presumably means that even the hot cheeseburger and fries, including napkin and plastic utensils, which would otherwise meet the taxable definition of prepared food, is non-taxable if sold to-go!