I had some guys come to my door last week to sell some frozen steaks in vacuum packages. They said they would have to charge tax on the retail value. Is this correct?
It appears that he is incorrect, although since there is a technical tax law distinction involved, he may be mistakenly misclassifying his product and collecting tax when he is not required to do so.
As a general rule, sales tax must be collected on all retail sales in the state.
Individuals or businesses that sell tangible personal property to the final consumer are required to remit a 6% sales tax on the total price (including shipping and handling charges) of their taxable retail sales to the State of Michigan. Sales of electricity, natural or artificial gas and home heating fuels for residential use are taxed at a 4% rate. Michigan does not allow city or local units to impose sales tax.
The person selling it is an individual or business, a steak is tangible personal property, and you aren't buying the steaks for resale, so you are a final consumer. So, unless an exemption applies, sales taxes are owed.
None of the Michigan Department of Revenue's Common Sales and Use Tax Exemptions apply. But, like most states, Michigan has a sales tax exemption for grocery store food, but not for restaurant food.
Naively, based upon the definitions given in like grocery store food exemption link, vacuum packed steaks ought to qualify as grocery store food and be exempt from taxation. In general, food that is subject to sales taxation is called "Prepared food" by the Michigan Department of Revenue.
“Prepared food” is:
food sold in a heated state or that is heated by the seller;
two or more food ingredients mixed or combined by the seller for sale as a single item,or;
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.
MCL 205.54g(4) and 205.94d(4).
One way that I could be wrong about my belief that this is not subject to taxation, if if the steaks come pre-seasoned rather than being just raw meat, in which case thy are prepared food under clause (2) above.
“Prepared food” does not include:
food that is only cut, repackaged, or pasteurized by the seller;
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;
food sold in an unheated state by weight or volume as a single item, without eating utensils, or;
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.
MCL 205.54g(5) and 205.94d(5).
Food sold in an unheated state by weight or volume as a single item, without eating utensils, is not “prepared food” and is exempt from sales and use tax. Therefore, deli trays of such foods as cheese and crackers, luncheon meats, seafood, or vegetables and dip, sold in an unheated state by weight or volume as a single item, without eating utensils, are not subject to sales or use tax.
If there is an exception to the exception for vacuum packaged steaks sold door to door, I was not able to locate it.