How do I know what rate of sales tax to charge on food when I sell both food for immediate consumption and grocery-type items?

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Whether food sold at retail is taxed at the 6.25% high rate as “food prepared for immediate consumption” or the 1% low rate as “food prepared for consumption off the premises where it is sold” depends upon two distinct factors.

1. The first factor is whether the retailer selling the food provides an area for on-premises consumption of food. If so, a rebuttable presumption is created that all sales of food by that retailer are considered to be prepared for immediate consumption and subject to tax at the high rate. As a result of this presumption, even bulk food could potentially be taxable at the high rate. However, this presumption is rebutted if a retailer demonstrates that:
   • the area for on-premises consumption is physically separated or otherwise distinguishable from the area where food not for immediate consumption is sold; and
   • the retailer has a separate means of recording and accounting for collection of receipts from sales of both high-rate and low-rate foods.
     
2. The second factor is the nature of the food item being sold. Some foods, such as hot foods, are always considered to be food prepared for immediate consumption, and thus subject to the high rate of tax.

See 86 Ill. Adm. Code 130.310 for more details on qualifying and non-qualifying food, soft drinks, and candy.

Note: Public Act (P.A.) 102-0700 suspends the state 1% low rate of retailers’ occupation and use tax on retail sales of groceries normally taxed at this rate from July 1, 2022, through June 30, 2023.

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