61 Pa. Code § 60.7

Current through Register Vol. 54, No. 45, November 9, 2024

Section 60.7 - Sale and preparation of food and beverages

(a)Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

Candy and gum-The term candy refers to all types of preparations commonly referred to as candy, including hard candy, caramel, chocolate candy, licorice, fudge, cotton candy, caramel coated popcorn, chocolate coated granola bars and similar items. The term gum refers to preparations commonly referred to as gum, including chewing gum, bubble gum and similar items.

Caterer-A business engaged in the service of providing prepared or ready-to-eat food and beverages for immediate consumption at a specific meal, affair or social function, usually at the premises of one other than the caterer, and normally including eating and drinking utensils.

Eating establishment-A business, or an identifiable location within a business, which advertises or holds itself out to the public as being engaged in the sale of prepared or ready-to-eat food or beverages, to customers for their immediate consumption on or off the premises. An eating establishment may be mobile or immobile and may or may not provide seating accommodations for its customers. The following are examples of eating establishments: restaurants, cafes, lunch counters, private and social clubs, taverns, dining cars, hotels, night clubs, fast food operations, honor boxes, pizzerias, fairs, carnivals, lunch carts, ice cream stands, snack bars, lunch trucks, cafeterias, employe cafeterias, theaters, stadiums, arenas, amusement parks, juice stands, carry out shops, coffee shops, popcorn stands, automats, vending machines and similar establishments.

Food and beverages-Includes items for human consumption, regardless of quantity. Examples are sandwiches, hot pizza, salad bar items, crackers, cakes, ice cream, baked goods, potato chips, yogurt, hot or cold drinks, milk, natural fruit or vegetable juices, cocoa, soft drinks, candy, gum and other similar items whether or not the item is individually packaged in a sealed wrapper. The term does not include water or ice, malt or brewed alcoholic beverages or spirituous and vinous liquors.

Food retailer-A business, or an identifiable location within a business, which is engaged in the sale of grocery type items for other than immediate consumption. The following are examples of food retailers: bakeries, pastry shops, doughnut shops, delicatessens, grocery stores, supermarkets, farm markets, convenience stores and similar businesses.

Gratuity-A voluntary payment by the purchaser or a reasonable mandatory charge by the vendor, in lieu of the voluntary payment, which is billed to the purchaser for services rendered in connection with the purchase of food or beverages or hotel or motel accommodations.

Grocery type items-Includes baked goods such as pies, cakes, bread and similar items; produce such as fresh fruit and vegetables; canned goods; meat and cheese by the pound; milk in pint, quart, 1/2 gallon or gallon quantities; prepackaged ice cream products such as ice cream by the pint, quart, 1/2 gallon or gallon quantities; ice cream cakes and pies; frozen foods; unprepared fish and seafood; bottled honey; bottled syrup; jam; jelly and similar items.

Nonfood retailer-A business engaged in the sale of nonfood items. The following are examples of nonfood retailers: department stores, service stations, clothing stores, book stores and similar businesses.

Selected food and beverage items-Soft drinks; meals; sandwiches, including hoagies, hot dogs, hamburgers and similar sandwiches; food from salad bars; hand-dipped or hand-served ice-based products, including, ice cream, yogurt, frozen water-based products and similar items; hot soup; hot pizza, either whole or by the slice; other hot food items such as chicken, pork ribs, macaroni and cheese and similar items and hot drinks such as coffee, tea, cocoa and similar items.

Soft drink-A nonalcoholic beverage, in either powder or liquid form, whether or not carbonated, such as soda water, ginger ale, colas, root beer, flavored water, artificially carbonated water, orangeade, lemonade, juice drinks containing less than 25% by volume of natural fruit or vegetable juices, and similar drinks. The term does not include fruit and vegetable juices containing at least 25% by volume of natural fruit or vegetable juice. The term does not include coffee, coffee substitutes, tea, cocoa and milk or noncarbonated drinks made from milk derivatives.

Vending machine-A device which mechanically dispenses tangible personal property for a purchase price.

(b)Scope.

(1)General. The term food and beverages includes all forms of food and beverages for human consumption. The term includes selected food items, candy and gum and grocery type items. The term does not include water, ice, malt or brewed and alcoholic beverages or spirituous and vinous liquors. The sale of water and ice are exempt from tax. The sale of malt or brewed alcoholic beverages and spirituous and vinous liquors are taxed in a different manner than the sale of food and beverages. Under the provisions of the sales and use tax law, the sale of food or beverages may be taxable or exempt depending upon the type of food or beverage or upon the basis of the location from which the food or beverage is sold. This is illustrated by the following:

(i) The sale of food and beverages by an eating establishment or a caterer is subject to tax. However, if an eating establishment operates a separate department from which grocery type items are sold, the sale of the grocery type items is exempt from tax if the eating establishment fulfills the requirements in this section.

(ii) The sale of selected food items is subject to tax, whether or not the selected food items are sold by an eating establishment, caterer, food retailer or nonfood retailer. However, the sale of selected food items is exempt from tax when made by a school or church in the ordinary course of its activities, by a business located on the premises of the school or church in the ordinary course of its activities, by a business located on the premises of the school or church and the sale is in the ordinary course of the activities of the school or church or by a nonprofit association which supports sports programs and which operates at fixed locations on public property.

(iii) The remaining provisions of this subsection address various situations under which the sale of food and beverages is exempt or is subject to tax.

(2)Malt or brewed alcoholic beverages and spirituous and vinous liquors.

(i) The sale of malt or brewed alcoholic beverages by a distributor to a retail dispenser, liquor licensee or the public is subject to tax. However, the sale of malt or brewed alcoholic beverages by a retail dispenser or a liquor licensee is not subject to tax.

(ii) The sale of spirituous and vinous liquor by the Liquor Control Board, a winery or other vendor authorized by the Liquor Control Board is subject to tax. However, the sale of spirituous and vinous liquor by a liquor licensee is not subject to tax.

(3)Sale of food and beverages by eating establishments. With the exception of sales qualifying for exclusion from tax under subparagraphs (i) and (ii), the sale of food and beverages, including candy and gum, by an eating establishment is subject to tax, whether or not the food or beverages are prepared or consumed on or off the premises. Tax is imposed upon the total purchase price billed to the purchaser for the food or beverages, including an amount billed for delivery but excluding a separately stated amount representing a gratuity.

(i)Sale of grocery type items by a food retailer. An eating establishment may also operate as a food retailer. An eating establishment failing to qualify as a food retailer, is required to collect tax upon its sale of items of food or beverages including grocery type items. To qualify as a food retailer, the eating establishment is required to satisfy the following requirements. The eating establishment shall maintain:

(A) A separate department or identifiable location from which grocery type sales are made.

(B) Separate records, such as a separate cash register or cash register key, for the sale of grocery type items.

(ii)Sale of candy, gum and prepackaged frozen items from vending machines. The sale of candy, gum and prepackaged frozen milk or frozen water-based products from a vending machine prior to October 1, 1991, and on or after December 13, 1991, is not subject to tax. However, the sale of these items from October 1, 1991, through and including December 12, 1991, is subject to tax.

(iii)Examples.

(A) "P" pizzeria sells whole pizzas, pizza by the slice and soft drinks. "P" has no eating facilities on its premises. "P" sells its food and beverages at its premises or delivers to its customers. The sale of whole pizza, pizza by the slice and soft drinks by "P" is subject to tax. If "P" makes a charge for delivery, the delivery charge is also subject to tax.

(B) "I" ice cream parlor sells hand-dipped ice cream products by the cone, dish, pint, quart and 1/2 gallon. "I" also sells ice cream cakes, pies and prepackaged ice cream sundaes from a separate department and maintains separate sales records. The sale of ice cream cakes, pies and prepackaged ice cream sundaes by "I" would not be subject to tax. The sale of hand-dipped ice cream in any quantity is taxable because hand-dipped ice cream qualifies as a selected food item.

(C) "R" restaurant sells prepared food and beverages. At the same location, but within a separately identified department, "R" operates a bakery from which baked goods, such as bread, cakes, doughnuts and cookies are sold and recorded on a separate cash register. The sale of food and beverages, including baked goods from "R's" restaurant operation is subject to tax. Baked goods sold from "R's" bakery operation are exempt from tax.

(D) "L" lunch counter sells quick lunches including hot and cold beverages, sandwiches and similar items. "L" has no tables or chairs for its customers. The sale of food and beverages by "L" is subject to tax.

(E) "T" tavern sells alcoholic and nonalcoholic beverages, sandwiches, popcorn, peanuts, crackers and similar items. "T" also sells prepared seafood such as lobsters, clams and crabs which may be purchased for consumption on or off the premises. "T" maintains separate sales records and a separate department from which unprepared lobsters, clams and crabs may be purchased. The sale of food and beverages, other than alcoholic beverages, including prepared lobsters, clams and crabs for consumption on or off the premises, is subject to tax. The sale of unprepared lobsters, clams and crabs from the separate department is not subject to tax.

(F) "V" vending machine operator, on or after December 13, 1991, sells hot and cold drinks, prepackaged crackers, pretzels, candy, gum, prepackaged frozen milk and frozen water-based products through vending machines. The sale of hot and cold drinks and prepackaged crackers and pretzels is subject to tax. However, the sale of candy, gum and prepackaged frozen milk and frozen water-based products is exempt from tax.

(4)Sale of food and beverages by caterers. The sale of food and beverages, including candy and gum, by a caterer is subject to tax. The tax is imposed upon the total purchase price billed to the purchaser including separately stated charges for tables, chairs, decorations, utensils, bartenders, food servers and similar charges. Since the caterer is required to pay tax at the time of the purchase of malt or brewed beverages and spirituous and vinous liquors, separately stated charges by the caterer to the customer for these items are not subject to tax.

Example:

"C" caterer caters a meal for a customer and issues the following billing:

Food @ $8/person $400

Room 100

Liquor 60

Floral Decorations 75

50 Settings, @ $2/setting 100

5 Waiters @ $25 125

1 Bartender @ $35 35

5 tables @ $5 25

50 chairs @ $2.50 125

Service charge 100

Gratuity 172

SUBTOTAL $1,317

Sales Tax 65.10

TOTAL $1,382.10

"C's" separately stated charge for liquor and the reasonable gratuity are not taxable. The service charge, which is not in lieu of the gratuity, is taxable. The amount of $1,085, therefore, is subject to tax.

(5)Sale of food and beverages by food retailers and nonfood retailers. Generally, the sale of food and beverages, including candy and gum, by a food retailer or a nonfood retailer is not subject to tax. However, the sale of selected food or beverage items, as defined in this section, by a food retailer or a nonfood retailer is subject to tax. If a food retailer or a nonfood retailer operates an eating establishment, the sale of food and beverages from the eating establishment is subject to tax.

Examples:

(i) "B" bakery sells baked goods, soft drinks, coffee, prepackaged and hand-dipped ice cream. The sale of baked goods and prepackaged ice cream by "B" is not subject to tax. However, the sale of soft drinks, coffee and hand-dipped ice cream by "B" is subject to tax.

(ii) "D" delicatessen sells meat and cheese by the pound, hoagies, sandwiches, prepared cold salads, hot beans, hot macaroni and cheese, cold hard-boiled eggs and hot barbecued chicken. The sale of meat and cheese by the pound, prepared cold salads and cold hard-boiled eggs by "D" is not subject to tax. The sale of hoagies, sandwiches, hot beans, hot macaroni and cheese and hot barbecued chicken by "D" is subject to tax.

(iii) "S" service station sells frozen ice cream products, small bags of potato chips, candy and heated sandwiches. The sales are not made from a vending machine. The sale of frozen ice cream products, bags of potato chips and candy by "S" is not subject to tax. The sale of heated sandwiches by "S" is subject to tax.

(iv) "C" candy store sells candy products. "C" also sells ice cream products such as hand-dipped ice cream by the cone, dish, pint or quart as well as coffee, milk shakes and ice cream sodas. The sale of candy by "C" is exempt from tax. However, the sale of coffee and hand-dipped ice cream products, such as cones, dishes, pints, quarts, milk shakes and ice cream sodas is subject to tax.

(v) "D" department store, a nonfood retailer, operates a restaurant located on its premises. The restaurant menu includes appetizers, salads, entrees, side dishes, desserts and beverages. The sale of food or beverage items by "D" from the restaurant is subject to tax.

(6)Sale of food and beverages at or from a school or church.

(i)Schools and churches. Generally, the sale of food or beverages by a school or church is exempt from tax, if the sales are in the ordinary course of the activities of the school or church. For example, the preparation and sale of a dinner to church members by a church organization in connection with a church function would be in the ordinary course of the activities of the church. However, if a school or church sells selected food or beverage items to the public or operates an eating establishment from which food or beverages are sold to the public in competition with other organizations or businesses selling similar taxable items, the school or church is deemed to be operating an unrelated trade or business with respect to the sales and is required to collect tax.

Examples:

(A) "S" public school prepares lunch at the school cafeteria which it sells to its students. The sale of the lunch by "S" would not be subject to tax since the sale of the lunch to the students is in the ordinary course of the activities of the school.

(B) "C" church operates a hoagie stand at the annual Farm Show. There are other vendors located at the Farm Show selling taxable sandwiches, coffee and soft drinks. The sale of hoagies by "C" is subject to tax since "C" is operating an unrelated trade or business.

(C) "U" university operates a restaurant on university property. The restaurant holds itself out to and primarily sells meals to the public, rather than the students and faculty. The operation of the restaurant by "U" is not in the ordinary course of its school activities. The sale of food and beverages by the restaurant is subject to tax.

(D) "C" church offers catered meals to the public on a regular basis. The meals may be served on or off the church premises. The business of providing the catered meals is an unrelated trade or business of the church. The sale of food and beverages by the church is subject to tax.

(E) "C" church caters wedding receptions, funeral luncheons and anniversary dinners at the church in connection with member and nonmember church weddings, funerals and anniversaries. The business of providing catered receptions, luncheons and dinners is an unrelated trade or business of the church. The sale of food and beverages is subject to tax.

(ii)Businesses located on the premises of a school or church. Generally, the sale of food or beverages by a business located on the premises of a school or church is exempt from tax, if the sale is in the ordinary course of the activities of the school or church. For example, the sale of lunch to students at a public school by a business would be in the ordinary course of the activities of a school. However, if the business sells selected food or beverage items to the public or operates an eating establishment from which food or beverages are sold to the public in competition with other businesses selling similar items, the business is required to collect tax upon its sale of food and beverages to the public whether or not they are consumed on or off the premises of the school or church.

Examples:

(A) "V" vending machine sales company, a private business, operates vending machines at various locations at "H" college from which food and beverages, including selected food and beverage items, are sold. The vending machines have been installed for the primary use by students and faculty of "H." The sale of food and beverages from the vending machines by "V" is exempt from tax.

(B) "P" pizzeria, a private business, operates a pizza shop near the premises of "C" college. "P" delivers the pizza it sells to its customers. The sale of pizza by "P" to students and faculty located on the premises of "C" is subject to tax, whether or not the pizza is delivered to the customer on school premises.

(C) "R" restaurant, a private business, operates an eating establishment on the premises of "C" college primarily for "C" college students. The public is also permitted to utilize "R's" restaurant facilities and purchase meals from "R." The sale of food and beverages by "R" to the public is not in the ordinary course of the activities of "C" college. "R" need not collect sales tax upon food and beverages sold to students and faculty. However, the food or beverages sold to the public is subject to tax.

(7)Sale of food and beverages by an exempt organization other than a school or church. Generally, the sale of food or beverages by an exempt organization, as defined at § 32.1 (relating to definitions), to the members of the organization in connection with an organizational activity is exempt from tax. However, if the organization sells selected food or beverage items to the public or operates an eating establishment from which food or beverages are sold to the public, the sale is subject to tax as an unrelated trade or business, unless the sale qualifies as an isolated sale as defined at § 32.1.

Examples:

(i) "E," an exempt charitable organization, sells hoagies to the public on three separate Saturdays during a calendar year from a location at which no other organizations or businesses are selling similar items. "E" makes no other taxable sales during the calendar year. The sale by "E" qualifies as an isolated sale under § 32.1. "E" would not be required to collect sales tax on its sale of hoagies.

(ii) "C" charity, an exempt organization, for the purpose of raising funds, sells hoagies to its members and the public on the first Saturday of each month during the calendar year. The sale by "C" does not qualify as an isolated sale as defined by § 32.1 but constitutes an unrelated trade or business of the organization. The sale of hoagies by "C" is subject to tax including those sales made during the first 3 months of the calendar year.

(iii) "F" fire company, an exempt organization, sells fried fish dinners each Friday evening. The dinners are consumed on the premises. "F" operates as an eating establishment. The sale of fish dinners by "F" does not qualify as an isolated sale as defined by § 32.1 but constitutes an unrelated trade or business of the organization. The sale of fish dinners by "F" is subject to tax including those sales made during the first 3 weeks of the calendar year.

(8)Sale of food and beverages by hospitals, nursing, retirement and convalescent homes and summer camps. The sale of food and beverages, including candy and gum, by hospitals, nursing, retirement and convalescent homes and summer camps to employes, visitors, staff and the general public is subject to tax. However, the value of furnished meals to patients, residents or campers which is included in the total charge for resident or patient care or camp activity is not subject to tax.

Examples:

(i) "H" hospital operates an employe dining room at which employes, staff and their guests may purchase food and beverages. The dining room of "H" qualifies as an eating establishment. The sale of food and beverages by "H" is subject to tax.

(ii) "N" nursing home operates a dining room at which patients, employes, staff and guests may eat. The dining room of "N" is an eating establishment. Therefore, the sale of food or beverages by "N" to employes, staff and guests is subject to tax. However, the value of the food provided by "N" to residents and patients which is included in the charge for residents' or patients' care is not subject to tax.

(iii) "R" retirement facility operates a dining room for its residents, employes, staff and guests. Residents are required to eat one meal at the dining room each day and are automatically billed for this meal with their other charges. Residents may eat additional meals for which they are billed. Charges to the residents for required meals are not taxable. The sale of meals to employes, staff and guests, including the optional meals sold to residents is subject to tax.

(9)Sale of food and beverages by nonprofit associations which support sports programs. The sale of food and beverages by a nonprofit association which supports a sports program and which operates at a fixed location on public property is exempt from tax.

(10)Sale of food and beverages at fairs and carnivals. The term eating establishment is defined to include a fair or carnival. Therefore, the sale of food and beverage items is subject to tax when sold at a fair or carnival. Examples of taxable food and beverages include: coffee; french fries; candied applies; funnel cakes; cookies; candy; cotton candy; baked potatoes; waffles; doughnuts; ice cream by the cup, dish or cone; soup; soft drinks; yogurt; bread sticks; cider by the cup; ice-based products such as flavored ice cones; popcorn; onion rings; cooked chicken; cooked pork ribs; soft pretzels; hoagies; sandwiches; nuts and similar items. The sale of grocery type items from an identifiable location by a vendor who operates as a food retailer and maintains separate records is exempt from tax. However, if the vendor fails to maintain a separate identifiable location and separate records for the sale of grocery type items, all sales are subject to tax.

Example:

"A" apple grower operates a stand at an apple festival. "A" sells cider by the glass as well as prepackaged quarts, half-gallons and gallons. The sale of apple cider by the glass is subject to tax. The sale of prepackaged quarts, half-gallons and gallons of apple cider is exempt if the sale is made from an identifiable location and "A" maintains separate records. If the sale is not made from an identifiable location and "A" fails to maintain separate records, all sales are subject to tax.

(c)Equipment and supplies. A person selling food or beverages is required to pay tax upon the purchase of utilities; equipment; fixtures; utensils, such as plates, cups, glasses, knives and forks; table cloths; napkins; straws; returnable containers and related supplies. For the taxability of similar items purchased by exempt organizations, see § 32.21 (relating to charitable, volunteer firemen's and religious organizations and nonprofit educational institutions). The purchase of the following items in connection with the sale of food or beverages is exempt from tax:

(i) Prepared or nonprepared food and beverages for resale.

(ii) Wrapping supplies as defined by § 32.1.

(iii) Examples:

(A) "C" caterer provides china plates and cups, silverware, table and chairs, table cloths and napkins to its customers when catering meals. "C" is required to pay tax upon its purchase of these items. "C" is not entitled to claim the resale exemption at the time of purchase even though "C" separately states a specific charge for the items on the customer's invoice.

(B) "L" lunch counter provides paper plates; styrofoam cups; straws; plastic knives, forks and spoons and napkins to its customers in connection with the sale of food and beverages. "L" may claim an exemption from the purchase of paper plates and styrofoam cups upon the basis that they qualify as wrapping supplies. "L" is required to pay tax upon the purchase of straws, napkins and plastic knives, forks and spoons.

61 Pa. Code § 60.7

The provisions of this §60.7 adopted July 22, 1994, effective 7/23/1994, 24 Pa.B. 3589.