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?

  • In almost all states, a good rule of thumb is that if it is served with utensils, this tax applies.
    – Jon
    Jul 31 '17 at 23:32

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.”

  • 1
    That document seems pretty clear on this matter. So Wal-Mart is correct and many other supermarkets are doing something illegal.
    – user43
    Jun 14 '15 at 20:03
  • 2
    @KennyLJ: I suspect "illegal" is a little strong. If an item is subject to sales tax the vendor has to pay it when selling in-state, and the convention in the U.S. is often to pass it along as a separate line item to the consumer. But unless you audited the supermarkets that don't charge a separate tax you couldn't know whether they are complying correctly with this law. For example, they may just not bother to code their POS systems to mark a tax to the consumer, but they could correctly account for it in their back end and in their payments to the state.
    – feetwet
    Jun 14 '15 at 20:51
  • @feetwet: I see, you are quite right, I didn't think of that possibility.
    – user43
    Jun 14 '15 at 21:41
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    FYI I used to live in Ohio, and the rule there was that there was sales tax on food consumed on the premises, but not on food consumed off premises. So if you bought food at a fast food place, when they asked if it was to eat in or take out, this not only meant "do you want a bag or a tray", but also "do you want to pay sales tax?" I don't know how many other states, if any, have a similar rule.
    – Jay
    Jun 15 '15 at 4:23
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    FYI #2 Also in Ohio: I briefly owned a small business, and among the rules was that the seller MUST "separately" charge sales tax, that it was against the law to say that sales tax was included in the price, or to have one of those promotions where you advertise that the seller is paying sales tax. Note this is Ohio, not Michigan, but I bring it up for general amusement and for any non-Michiganders who may read this question.
    – Jay
    Jun 15 '15 at 4:25

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.