Michigan 6% sales tax on food prepared in a supermarket

Question

In Michigan, food sold in supermarkets is exempt from the 6% sales tax. In contrast, food that you get in say a restaurant is not.

The fuzzy area is food that is prepared in supermarkets. E.g. Pizza or rotisserie chicken baked in the supermarket itself. (Most people who buy such items will usually bring it home. But in many supermarkets you will also have the option of sitting and eating there, because there will be some tables and chairs.) Are these supposed to be subject to the 6% sales tax?

On such food items, most supermarkets do not seem to charge that 6% sales tax. However, I bought a rotisserie chicken from Wal-Mart yesterday (prepared in Wal-Mart itself) and at the register, a 6% sales tax was added on.

So what should the correct tax treatment be?

Answer 1

Yes, they should be. In most states that have a tax such as this, it's called a "prepared foods" tax, which is merely a tax on any food intended to be consumed immediately after purchase.

The relevant document for Michigan can be found online, although most states with prepared foods taxes follow the same general principles for what is considered prepared food (I live in Nebraska and our definitions for this tax are almost exactly the same).

“Prepared food” is:

1. food sold in a heated state or that is heated by the seller;
2. two or more food ingredients mixed or combined by the seller for sale as a single item, or;
3. food sold with eating utensils provided by the seller, including knives, forks, spoons, glasses, cups, napkins, straws, or plates, but not including a container or packaging used to transport the food.

“Prepared food” does not include:

1. food that is only cut, repackaged, or pasteurized by the seller;
2. raw eggs, fish, meat, poultry, and foods containing those raw items requiring cooking by the consumer in recommendations contained in section 3-401.11 of part 3-4 of chapter 3 of the 2001 food code published by the food and drug administration of the public health service of the department of health and human services, to prevent foodborne illness;
3. food sold in an unheated state by weight or volume as a single item, without eating utensils, or;
4. 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.

So, regardless if an item might otherwise fall within the definition of “prepared food” outlined above, if that item is described in one of the exclusions to “prepared food,” it is not “prepared food.”

Answer 2

Let's examine the no-so-fast food industry (sorry, I couldn't pass on that one). My understanding of the rule is based on anecdotal evidence and having worked for a $23B North American grocery supplier for 10 years. Take it as gospel that governments' right to tax is absolute. Soooo, unless you can articulate an exception (or one is present in the statute) a commercial transaction in Michigan almost always creates a taxable event. While the exceptions are clear (for a Michigan statute) things sometimes "fall through the cracks". MY favorite is "WE PAY YOUR TAX!". This is always? a dealer in hard goods, not grocery. Cars, motorcycles, appliances, furniture, hardware, clothing, jewelry, etc. This is a marketing ploy. The seller will book the sale at the price including tax, and break down the sale internally. You are still paying the tax. If a car dealer sells $2M in inventory annually, he is NOT going to fork over an additional $120,000.00 out of his pocket. His books will reflect $1.88M in sales and $120K in tax. You paid the tax. The rule I learned from an astute tax guy was this, "If it doesn't come in a sealed container, and it's heated, or frozen in the case of an ice cream cone melting in your hand, and you can somehow jam that purchase in your mouth at the register, it's taxable". Hello Arbys.