Sales & Use Tax Rate Increase09/27/2019
As of October 1, 2019, the tax rate on sales of meals and certain drinks in Connecticut will increase 1% from 6.35% to a total effective tax rate of 7.35%. This rate is also effective for all meals sold by grocery stores, which until now have been taxed in a different manner than other eating establishments.
Meals are defined as food that is ready for immediate consumption, packaged or wrapped, and sold on a “take out” or “to go” basis. “Meals” can be a full meal or even a single item as long as it is served at the location of the seller, delivered to the purchaser’s location, or sold as take out.
Here’s one area where it gets confusing though…typically food items sold in bulk – in amounts that are more than what one would be able to consume immediately – are not taxable. Therefore a loaf of bread or a whole cake would not subject to this tax. However, whole cooked chickens and racks of ribs are, even though your average person would likely have no plans of consuming either all in one sitting.
The increased tax rate also applies to most drinks, non-alcoholic and alcoholic alike. Corkage fees for wait staff to open “bring your own” alcoholic beverages is also now taxed at the 7.35% rate.
Here are a few other things to note about this change on October 1:
- Banquet meals: If a hotel, banquet hall, restaurant or social club will not rent event space unless it also furnishes meals and beverages (a fairly common practice), the total charges for the event are taxable at the 7.35% rate, even if the room charges are itemized separately from the meals and drinks.
- Delivery services: If a food delivery business, like UberEATS, Postmates or DoorDash, takes orders from customers that it then purchases from a restaurant to resell and deliver to the end customer, it must charge sales tax on the entire amount charged, including deliver fees.
- Resale purchases: A restaurant, caterer or grocery store will often supply disposable products with the meals they sell, like paper napkins, plastic plates, Styrofoam containers, etc. They can purchase these items without paying tax on them if they show a resale certificate to the supplier.
There are a few exceptions as well, including food and beverage sales to or by a not-for-profit medical facility, food sold in student dorms and cafeterias, and sales of less than $20 by an accredited school.
Obviously, there are all sorts of nuances to this tax law, like most others, so if you have any questions at all, feel free to reach out to us for clarification. You can also read all the details here.