Sales And Use Tax Division
How to Comply with the Sales Tax Reductions on Eligible Food and Beverage
Effective: April 1, 2002

On October 1, 1996, the State of Georgia reduced the 4% State Sales Tax on "eligible food and beverage" to 2%. This was the first step to phase out State Sales Tax on eligible food and beverage over the next two years. On October 1, 1997, the rate on food and beverage was reduced to 1%. On October 1, 1998, no sales tax will be charged on eligible food and beverage. Local Option, Special Purpose, Educational, and MARTA Sales Taxes will still have to be collected except for the Homestead Tax (DeKalb and Rockdale Counties) and the Local Option Tax in Taliaferro, Webster Counties and any future Local Option Tax. This change does not affect the exemption from all sales taxes when purchases are made with food stamps or WIC coupons. All other food purchases must be categorized as eligible or ineligible. Full tax will continue to be charged on non-eligible food and beverage. The reduced tax will be charged on eligible food and beverage.

 

The purpose of the change in Georgia's Sales Tax Law is to exempt from State sales tax food purchased to be taken home, prepared, and eaten. The general rule is that eligible food, sold to be eaten off-premises, qualifies for the reduced tax rate. Food sold to be eaten on-premises is not exempt. The Regulation implementing the new exemption is patterned after the regulations controlling the use of food stamps. Therefore, Georgia's Regulation centers on the type of food being sold and where the food is consumed. It is the responsibility of the dealer to determine whether or not an item qualifies for the reduced State tax rate. The determination is a simple two-step process. First, does the item qualify as eligible food? Then, if it does, where will it be eaten? Eligible food is any food item which could be purchased with Federal Food Stamps. This includes most food items sold in grocery stores with the exception of alcohol and tobacco products. Food stamps may not be used to purchase food which is hot at the point of sale. Therefore, food which is cooked on-premises and kept warm will not be exempt. For example, many grocery stores sell hot roasted chicken from a rotisserie. The chicken would not be considered eligible for the exemption. The food must be sold for off-premises consumption. Food sold in grocery stores to be eaten in the store does not qualify for the exemption. Food such as ice cream or soft drinks sold in open containers or through vending machines does not qualify for the exemption.

 

All retailers must keep separate records of their exempt sales for audit by the Georgia Department of Revenue. The level of record keeping necessary will vary based on the type of food dealer. The Department of Revenue has classified food dealers into three categories. The first category is food dealers which accept food stamps. The second category is food dealers which do not accept food stamps, but whose sales of eligible food comprise at least 50% staple items. The third category is for all other dealers including dealers which also serve the food on-premises. Dealers in the first category (those who accept food stamps) should notice little difference in their operation. If the food item can be purchased with food stamps, then it qualifies for the reduced tax rate. If the food cannot be purchased with food stamps, then it does not qualify for the reduced tax rate. The dealer will have to keep separate records of eligible and ineligible food sales, but all sales of eligible foods will be presumed to be for off-premises consumption. Dealers in the second category (those who do not accept food stamps) will be subject to one additional record keeping responsibility. They must show that 50% of their eligible food sales comprise staple products. Briefly, foods that are staples include meats, breads, cereals, vegetables and dairy products. Once the retailer shows that 50% of eligible sales consist of staple products, then all eligible sales (as identified by the dealer) will be presumed to be for off-premises consumption. Dealers in the first category, especially those with facilities for eating on-premises whose mix of eligible food sales do not fit into the second category, will have the burden of maintaining records to show that the sale was for off-premises consumption. The Department of Revenue will presume that the sale was for on-premises consumption, and thus subject to the full tax unless the dealer can provide records to the contrary (i.e., an item sold "to go"). As an example, a grocery store sale of a dozen doughnuts will be presumed to be for off-premises consumption. A convenience store sale of a dozen doughnuts will likewise be presumed for off-premises consumption, but only if 50% of the store's eligible sales consist of staple products. A doughnut shop sale of a dozen doughnuts will be presumed for on-premises consumption unless the retailer keeps records indicating that the sale was for off-premises consumption.

 

It is important to remember that there is no change for those customers using food stamps or WIC coupons. Sales where food stamps or WIC coupons are used to pay for the eligible food continues to be totally exempt from all sales taxes.

 

Any questions about the implementation of the State Sales and Use Tax Exemption for food and beverage can be addressed to the Sales and Use Tax Division at 1-877-GADOR11 (1-877-423-6711) or by contacting one of our Regional Field Offices.