DEPARTMENT OF TREASURY

STATE TREASURER

GENERAL SALES AND USE TAX RULES

SPECIFIC SALES AND USE TAX RULES

Filed with the secretary of state on
 
These rules become effective immediately after filing with the secretary of state unless adopted under section 33, 44, or 45a(9) of the administrative procedures act of 1969, 1969 PA 306, MCL 24.233, 24.244, or 24.245a. Rules adopted under these sections become effective 7 days after filing with the secretary of state.

(By authority conferred on the department of treasury by section 3 of 1941 PA 122, MCL 205.3)

R 205.136 of the Michigan Administrative Code is rescinded, as follows:

GENERAL SALES AND USE TAX RULES

R 205.136  Food for Human Consumption Rescinded.

  Rule 86. (1) Retail sales of food for human consumption normally considered as grocery items for home consumption are tax exempt.

  (2) Alcoholic beverages (containing ½ of 1% or more of alcohol by volume) such as beer, wine, and liquor, are subject to tax.

  (3) Tobacco and tobacco products are subject to tax.

  (4) "Prepared food" is subject to tax. All of the following apply:

   (a) “Prepared food” means any of the following:

    (i) Food sold in a heated state or that is heated by the seller.

    (ii) Two or more food ingredients mixed or combined by the seller for sale as a single item.

    (iii) Food sold with eating utensils provided by the seller.

   (b) "Prepared food" does not include any of the following:

    (i) Food that is only cut, repackaged, or pasteurized by the seller.

    (ii) Raw eggs, fish, meat, poultry, and foods containing those raw items requiring cooking.

    (iii) Food sold in an unheated state by weight or volume as a single item, without eating utensils. The following are used to determine weight or volume:

     (A) Weight is a measure of heaviness, expressed in units such as pounds or grams.

     (B) Volume is a 3-dimensional measure, expressed in units such as pints, quarts, cubic centimeters, or liters.

     (C) An item is sold by weight or volume when the sales price is determined by multiplying its per unit price by the item’s weight or volume.

    (iv) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas, sold without eating utensils.

  (5) An eating utensil is considered a tool, instrument, or item used or intended to be used to facilitate the eating of food. Examples of eating utensils include, but are not limited to, knives, forks, spoons, ice cream/popsicle sticks, skewers, glasses, cups, napkins, straws, and plates. The following apply:

   (a) An eating utensil does not include a container or packaging used to transport food, such as a plastic carton in which take-out soup or salad is sold. A waxed paper sheet used to select an item, such as a donut or cookie, and then placed in a box or bag for transport with the baked good, is not considered an eating utensil.

   (b) Eating utensils are "provided by the seller" under all of the following conditions:

    (i) For a seller with a prepared food sales percentage greater than 75%, eating utensils are "provided by the seller" when the utensils are made available to purchasers.

    (ii) For a seller with a prepared food sales percentage of 75% or less, eating utensils are "provided by the seller" if the seller's practice, as represented by the seller, is to physically give or hand the utensils to purchasers. Plates, bowls, glasses, or cups necessary for the purchaser to receive the food, for example, a glass for a dispensed soft drink or milk, or a plate for salad from a salad bar, need only be made available.

    (iii) A seller's "prepared food sales percentage" is a fraction determined by dividing the following described numerator by the following described denominator:

     (A) The numerator shall consist of the seller's annual sales of all of the following:

      (1) Food sold in a heated state or heated by the seller.

      (2) Two or more food ingredients mixed or combined by the seller for sale as a single item, not including food items specifically excluded in subrule (4)(b) of this rule.

      (3) Food where plates, bowls, glasses, or cups are necessary to receive the food, for example, dispensed soft drink or milk, or salad bar.

     (B) The denominator shall consist of the seller's total annual sales of all food and food ingredients at the establishment including prepared food, candy, dietary supplements, and soft drinks.

     (C) Sales of alcoholic beverages are not included in the numerator or denominator.

   (c) For a seller with a prepared food sales percentage greater than 75% who sells an item that contains 4 or more servings packaged as 1 item sold for a single price, that item does not become prepared food due to the seller having utensils available. Both of the following shall apply:

    (i) If the seller provides utensils for that item as in subdivision (b) of this subrule, then the item is considered prepared food.

    (ii) Whenever available, serving sizes shall be determined based on a label on an item sold. If no label is available, then a seller shall reasonably determine the number of servings in an item.

   (d) When a seller sells a food item that has a utensil placed in the package by a person other than the seller, both of the following shall apply:

    (i) If that person's North American Industry Classification System (NAICS) classification code is that of manufacturer (sector 311), the seller is not considered to have provided the utensil except as provided in subdivisions (a), (b) and (d) of this subrule.

    (ii) For any other packager with any other NAICS classification code, for example, sector 722 for caterers, the seller is considered to have provided the utensil.

   (e) The prepared food sales percentage shall be calculated by a seller for each tax year or business fiscal year, based on the seller's data from the prior tax year or business fiscal year, as soon as possible after accounting records are available, but not later than 90 days after the beginning of the seller's tax year or business fiscal year.

   (f) A single prepared food sales percentage shall be determined annually, for all of the seller's establishments in this state.

   (g) A new business shall make a good faith estimate of its prepared food sales percentage for its first year. A new business shall adjust its good faith estimate prospectively after the first 3 months of operation if actual prepared food sales percentages materially affect the 75% threshold test.

  (6) Examples of nontaxable food items sold without eating utensils by a grocer or other food retailer for human consumption include, but are not limited to, the following:

   (a) Baked goods and baking ingredients.

   (b) Bouillon and soups.

   (c) Butter, margarine, and peanut butter.

   (d) Candy, chocolate, and confectionery.

   (e) Carbonated beverages (bottle deposits are not subject to tax).

   (f) Cereal and cereal products.

   (g) Chewing gum, non-medicated. .

   (h) Cocktail mixes, dry or liquid.

   (i) Coffee, coffee substitutes, coffee beans, and tea (loose or bags).

   (j) Condiments, relishes, and spices.

   (k) Diet food, dietary supplements (identified as a dietary supplement in the supplemental facts box on the label, and containing a vitamin, mineral, herb or other botanical, or amino acid), energy drinks, and health foods.

   (l) Eggs and egg products.

   (m) Extracts and flavoring as an ingredient of food products.

   (n) Fruit and fruit products.

   (o) Gelatin.

   (p) Ice, only when to be ingested by humans.

   (q) Ice cream, sherbets, and toppings.

   (r) Meat and meat products.

   (s) Milk and milk products.

   (t) Powdered drink mixes, pre-sweetened or natural.

   (u) Pre-packaged snack foods such as, crackers, potato chips, and popcorn.

   (v) Shortening.

   (w) Vegetables and vegetable products.

   (x) Vitamins and vitamin drinks.

   (y) Water, bottled.

  (7) Examples of items subject to tax include, but are not limited to, the following:

   (a) Alcoholic beverages (containing ½ of 1% or more of alcohol by volume).

   (b) Animal and pet foods.

   (c) Animal bait such as, carrots, sugar beets, corn.

   (d) Cough drops and cough syrup.

   (e) Decorative gourds and jack-o-lanterns.

   (f) Ice not for ingestion by humans, such as for use in a cooler or an ice chest.

   (g) Medicated chewing gum.

   (h) Salt blocks.

   (i) Toothpaste and mouthwash.

   (j) Throat lozenges.