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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
R
460.0000 Reimbursement for Sales Tax—Regulation 1700
Annotation 460.0024.100
460.0024.100 Excess Tax Reimbursement—Combination Packages of Food and Non-Food Items. Taxpayer sells a variety of combination packages that may contain both food and non-food items. These combination packages may be different varieties of holiday baskets, e.g., baskets containing packages of coffee along with coffee cups; cheeses along with wine or sparkling cider; candy and toys in the same basket; or cakes with non-edible decorations. Is the taxpayer required to segregate the value of the food and non-food items or can the taxpayer elect to charge tax on the entire price of the combination package being sold?
The language in subdivisions (b) and (c) of Regulation 1602 makes it mandatory for the taxpayer to segregate between the food and non-food products contained in the combination package and does not establish conditions that allow retailers, at their option, to pay tax on the food products in combination packages.
If the retail value of a combination package, exclusive of the container, consists of more than 10 percent non-food products, the taxpayer is required to segregate the retail selling price of non-food merchandise from the selling price of the combination package and pay tax measured by the retail selling price of the non-food merchandise. In the case of a cake or other bakery good, the taxpayer is required to make a similar segregation when more than 50 percent of the total retail value of the cake or bakery good represents the value of non-edible decorations.
Whether a retailer may add sales tax reimbursement to the sales price of the tangible personal property sold at retail to a purchaser depends solely upon the terms of the agreement of sale. (Regulation 1700(a).) The retailer is not required to collect sales tax reimbursement from its customers at all. Nor is the retailer prohibited from selling combination packages on a tax-included basis by posting a sign or including a price tag or advertisement that the sales price of its combination packages include sales tax reimbursement. In that situation, the retailer would subtract from its tax-included gross receipts the amount of sales tax due on the non-food items or the non-edible decorations, and report that amount to the Board. If no records are kept that substantiate the value of the non-food items or non-edible decorations, the retailer would incur a liability to the Board measured by the reasonable value of the non-food items or non-edible decorations.
But where the taxpayer does collect sales tax reimbursement on its sales of combination packages, collecting tax reimbursement on the sale of food items included in these packages would constitute excess tax reimbursement. Under Regulation 1700(b), the excess tax reimbursement is either refundable to the taxpayer's customers or payable to the Board. 12/16/03. (2004–2).