As families and friends gather across the country to celebrate Thanksgiving, sales tax might not be at the front of many people’s minds. But how that meal made its way to your table can make a big difference in the amount of sales tax you pay.
An increasing number of Americans are turning to pre-made Thanksgiving meals instead of the time-worn tradition of trudging through the supermarket to buy all the necessary ingredients and spending Turkey Day cooking, according to Forbes. Though this may save many hosts valuable time (and avoid arguments with relatives about whether a turkey should be brined), in many states it will result in a stuffed-up bill because most states impose a sales tax on “prepared” foods.
Hosts who plan on cooking their meal from scratch are able to ride the gravy train to a lower bill, as most states do not impose a sales tax on grocery items sold in stores. But for those seeking convenience from prepared foods, they’ll have to fork over a larger piece of the pie; the majority of states that exempt grocery items impose a sales tax on “prepared” foods. For example, Colorado generally exempts food from the sales and use tax; however, it imposes a sales tax on prepared food items sold by a grocery store. New York also exempts most food sold by grocery stores from the sales tax. But sales tax does applies to food that is heated, sold for consumption on the premises, or has been prepared by the seller and is ready to be eaten unless it is packaged and refrigerated and not arranged on a platter (meaning New York is willing to give up some sales tax revenue cold turkey). Other states, like Illinois, tax all food sales but apply a lower sales tax rate to non-prepared food sold at a grocery store.
Thanksgiving meals shipped to your home are another increasingly popular option. Some services ship fully prepared meals, while others, like Blue Apron and Hello Fresh, ship uncooked but pre-measured ingredients along with instructions. These meal delivery services add another layer of complexity to the taxability question of prepared foods: the ability of states to impose a sales tax on internet sales from out-of-state retailers. Many online retailers do not collect sales taxes for customers in states where the retailers do not have a physical presence, though states are making efforts to rectify that carve out.
Those skipping the kitchen entirely and instead choosing to eat out at a restaurant won’t be able to avoid sales tax either; all states with a sales and use tax impose that tax on restaurant sales. The higher bill might be a small price to pay for the benefit of being able to avoid spending Thanksgiving over a hot stove and having to clean up afterward.
So whether you stay home or go out to eat, you’re likely to find SALT on the menu this Thanksgiving.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should states tax pre-made meals?
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