Grocery and Convenience Stores:

Taxable and Nontaxable Sales

Susan Combs, Texas Comptroller of Public Accounts

Food products (such as flour, sugar, bread, milk,

eggs, fruits, vegetables and similar groceries) are
not taxable.
Tax is due, however, on many other items sold
by grocery and convenience stores, such as
paper goods, pet care products, beauty and
hygiene products, clothing and books, as well as
many edible goods.
The following
information provides
guidance on the
taxability of products
sold by grocery and
convenience stores.

Tax Rates
Retailers must collect
state sales tax on all
taxable items. Local
sales tax for cities,
counties, special
purpose districts or
transit authorities
may also be due
depending on the location of the store.

Discounts, Coupons, Gift

Certificates and Rebates Deals
For more information,
visit our website
www.window.state.tx.us.
Receive tax help at
https://www.window.
state.tx.us/taxhelp/.

Discounts

Cash discounts are offers to customers that

reduce an items sales price. For example, a
retailer may offer a customer a 10 percent
discount on all purchases paid with cash. If the
customer buys a taxable item marked at $150,
the discounted price is $135 after the 10 percent
discount of $15 is deducted. Tax is due on the
final discounted sales price of $135.

NOVEMBER 2012

Coupons

A coupon is a cash discount. If the product sold is

taxable, the value of the coupon is subtracted from
the sales price and tax should be collected on the
resulting cost to the customer.

Gift Cards and Gift Certificates

Sales tax is not due on the sale of a gift card

or certificate. When the gift card or certificate
is redeemed for merchandise, either by the
original purchaser or
someone who may
have received the
card as a gift, the gift
card or certificate is
treated the same as
cash given for the
purchase of the item.
If the item purchased
is taxable, sales tax is
due on the full sales
price including any
amount paid with the
use of the gift card.

Rebates

There are generally two types of rebates that

may be available to purchasers: manufacturers
rebates and retailer rebates. Rebates are
generally refunds of a portion of the sales price
of an item. Most rebates are issued after a
transaction occurs.
A mail-in manufacturers rebate that is given
after the sale does not reduce the sales price
charged by the retailer to the customer because
the rebate is given by a third party (the
manufacturer) after the transaction between the
retailer and purchaser has occurred.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

For example, a $250 camera comes with

a $50 manufacturers mail-in rebate offer.
A customer buys the camera for $250 and
mails in proof of purchase and any required
documentation to receive the $50 rebate from
the manufacturer.
The retailer must collect tax on the $250 sales
price of the camera, the amount charged the
customer.
A manufacturers rebate that is deducted at
checkout is treated as a cash discount. If a $250
camera has a $50 rebate taken at the time of
sale, tax is due on the final selling price of $200.
A mail-in rebate from the retailer may be used
to reduce the taxable sales price of the item
when the rebate is processed and the refund
is issued. In this scenario, the customer must
pay tax on the original sales price of the item
at the time the sale occurs (without deducting
the amount of the rebate). When the seller
subsequently processes the rebate request, it
should also refund the proportionate amount
of sales tax that was collected on the part of the
sales price that was rebated to the customer.

For more information,

visit our website
www.window.state.tx.us.
Receive tax help at
https://www.window.
state.tx.us/taxhelp/.

For example, a customer buys software for

$150 with an available mail-in rebate from the
retailer of $25. The amount of tax due at the
time the sale occurs is calculated on the sales
price of $150. When the retailer rebates the
$25, the retailer should also rebate the tax the
customer paid on the $25. In this example,
if the tax rate on the initial transaction was
8.25 percent, the total tax due at the time
the sale occurred is $12.38. When the rebate
is processed, the amount the retailer should
refund is $27.06 which equals the $25 rebate
plus $2.06 (25 x .0825) in state and local tax.

Taxable Items
Beer and Wine

Tax is due on beer and wine.

Candy and Gum

Candy and gum are taxable. Candy is any

confection made of natural or artificial

sweeteners and includes bars, gum, drops and

taffy. Candy also includes items such as nuts,
chips, hard pretzels, popcorn, raisins and other
fruits that are coated with chocolate, yogurt,
caramel or similar sweet flavorings.
Products used exclusively for cooking, such
as chocolate bits and cake sprinkles, are not
candy.

Ice

Tax is due on ice and dry ice.

Ice Cream and Popsicles

Ice pops, juice pops and popsicles that do not

contain milk products or more than 50 percent
fruit juice are taxable. These items are taxable
regardless of how many are in a package.
Tax is also due on ice cream sundries, including
sherbet and frozen yogurt, sold in individual
units, including ice cream, sherbet and frozen
yogurt served on cones; in cups or dishes; ice
cream sandwiches, bars, sticks, specialties or
similar ice cream sundries and half pints of ice
cream, sherbet or frozen yogurt.
Tax is not due on pre-packaged ice cream
sundries that contain two or more items,
or on popsicles that contain more than 50
percent juice. For example, prepackaged boxes
containing two or more ice cream sandwiches,
sherbet push-up pops or ice cream cones are not
taxable. (In the past, pre-packaged ice-cream
products were only exempt from tax if the
package included six or more items.)
Whole ice cream cakes, whole ice cream pies and
ice cream, sherbet and frozen yogurt sold in pint
containers or larger are not taxable, unless the
seller provides plates or other eating utensils.

Soft Drinks and Energy Drinks

Soft drinks are taxable. Soft drinks are

carbonated and non-carbonated, non-alcoholic
beverages that contain natural or artificial
sweeteners, and include flavored waters.
Soft drinks also include canned, bottled, frozen
or powdered drinks and drink mixes, including

Grocery and Convenience Stores: Taxable and Nontaxable Sales

all ades and punches that do not contain more

than 50 percent vegetable or fruit juice by volume.
Soft drinks do not include beverages that contain
milk or milk products; soy, rice or similar milk
substitutes; or juices that contain more than 50
percent vegetable or fruit juice by volume. The
term also does not include unflavored water,
spring water, sparkling water or mineral water.
Energy drinks, sports drinks and naturally or
artificially sweetened electrolyte drinks are taxable
as soft drinks, unless they contain milk, milk
products, soy, rice or similar milk substitutes; or
juices that contain more than 50 percent vegetable
or fruit juice by volume; or are labeled with a
Supplements Facts panel.
Energy drinks labeled with a Nutrition Facts
panel that contain milk or more than 50
percent fruit or
vegetable juice
by volume are
food, as defined
in Rule 3.293. A
drink meeting
the definition of
food is not taxable
unless sold in an
individual-sized
container of eight
ounces or less (such
as a juice box or
half-pint carton of
milk) by a seller
who provides eating facilities (seats/tables); or
sold ready for immediate consumption such as
with a meal or served in a cup or glass or with
a straw, if eating facilities are not provided.
An individual-sized beverage is a bottle or
carton of a half-pint (8 ounces) or less. Bottles
or cartons greater than a half-pint, that are
more than 50 percent fruit or vegetable juice
by volume, or that contain milk, milk products
or milk substitutes, are exempt from sales and
use tax when sold by a retailer providing eating
facilities, unless sold ready for immediate
consumption.

Supplement Facts Panel or

Labeled as Dietary Supplement
Dietary supplements are exempt from Texas
sales and use tax. Therefore, if an item, such
as an energy drink meets the definition of a
dietary supplement, it is not subject to sales
tax even if it is sold ready for immediate
consumption or by a place of business with
eating facilities.
A dietary supplement is defined in Texas Tax
Code 151.313 as a product that:
contains one or more vitamins, minerals, herbs
or botanicals, amino acids, or substances that
supplement the daily dietary intake;
is not represented as food or the sole item of
a meal or the diet; and
is labeled dietary supplement or supplement.

Photo Processing

Tax is due on
film processing,
including
processing
performed at
self-use kiosks,
negatives, prints,
pictures-ondisk, slides,
enlargements,
retouching services
and similar items.

Rentals

Rentals of DVDs, videos, video players, floorcleaning equipment or similar property are
taxable.

Cigarettes and Tobacco Products

Sales tax is due on cigarettes, cigars and all

other tobacco products.

Books and Magazines

Books, comics and magazines are taxable.

Phone Cards

For Texas tax and fee purposes, there are two

types of phone cards: telephone prepaid calling
cards and prepaid wireless telecommunications

For more information,

visit our website
www.window.state.tx.us.
Receive tax help at
https://www.window.
state.tx.us/taxhelp/.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

service cards. Both types of cards are subject to

sales tax.
A telephone prepaid calling card is a
card or other item, including an access
code, that represents the right to access
telecommunications services, other than prepaid
telecommunications services as defined in Rule
3.344(a) (9), through multiple devices, regardless
of the network providing direct service to the
device used, for which payment is made in
incremental amounts and before the call or
transmission is initiated. For example, a calling
card that allows a user to access a long distance
telecommunications network for the purpose of
making international calls through a pay phone
is a telephone prepaid calling card. Sales tax is
collected on telephone prepaid calling cards.
A prepaid wireless telecommunications service
card is a card, PIN number, access code or
similar device that allows a user to access only a
specific wireless network, or that is intended for
use with a specific user account or device (e.g.,
to add more minutes to an existing account).
For example, a card that allows a purchaser
to add minutes to a cell phone is a prepaid
wireless telecommunications service card.
Sales of prepaid wireless telecommunications
service cards and devices are subject to the
Prepaid Wireless 9-1-1 Emergency Services Fee
in addition to sales tax. The amount of the fee
is 2 percent of the retail price on the sale of
prepaid wireless telecommunications service,
which includes phones, cards and other wireless telecommunications devices. The fee is collected from the customer at the time of the sale
in addition to sales tax.
For more information,
visit our website
www.window.state.tx.us.
Receive tax help at
https://www.window.
state.tx.us/taxhelp/.

all food sold on a plate, in a bowl or with

eating utensils; and
all sandwiches (unless sold frozen).
Prepared food also includes any item created
at the store by mixing or combining two or
more food ingredients that is offered for sale
by weight or volume as a single item such as
salad, salsa, pesto and hummus. Tax is not due,
however, on items that are typically reheated
prior to eating (e.g., macaroni and cheese) or
on food that has merely been cut, repackaged
or pasteurized such as fruit or vegetable trays.
Foods sold in a heated state as listed above
are items that are cooked by the seller and sold
hot such as barbecued beef, fried or rotisserie
chicken, French fries, chili and soup. The term
also includes foods that are sold frozen or cold
if the seller heats them for the purchaser. Tax
is not due on such foods, however, if the store
simply has a microwave on the premises that
the purchaser can use to heat the food. For
example, no tax is due on the sale of a frozen
burrito if the purchaser uses a microwave
in the store to heat the burrito before
consumption. Tax is due, however, if the seller
heats the burrito for the purchaser.

Dining Area

Prepared food includes:

If a store has eating facilities, sales tax is

due on individual-sized packages of snack
items such as chips, crackers, and peanuts;
individual-sized servings of beverages such as
milk or juice, when sold at a register located in
or adjacent to the dining area or where readyto-eat food or beverages are sold. For example,
a grocery store that sells hot fried chicken in
an area with tables and chairs should collect
tax on individual-sized bags of chips sold in
the dining area, but should not collect tax on
individual sized bags of chips sold at the main
registers used primarily to sell groceries.

all food (except bakery items sold without

eating utensils) sold in a heated state;
hot drinks such as cocoa, coffee and tea;
all cold drinks, except water, sold in a cup or
glass or with a straw;

Eating facilities include tables, benches,

booths and chairs. Individual-sized packages
of beverages are those that are eight ounces
or less. Individual-sized packages of snack
items are those that are less than five ounces,

Prepared Food

Prepared food is taxable.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

but do not include cookies or other bakery

items.Bakery goods, such as doughnuts and
cookies, are only taxable if sold with a plate or
eating utensils. If a store doesnt have eating
facilities, sales tax should not be collected on
chips, crackers, peanuts, juice, milk or similar
items, even if sold in individual-sized packages.
A combination business that contains a
restaurant, deli, fast-food franchise or
similar operation in part of the building and
a convenience store in the other part must
collect tax on individual servings of snack
items and drinks
sold at the register
located in the
restaurant area of
the store, regardless
of whether there
are eating facilities
in that area. Sales
of such items at the
register located in
the convenience
store side of the
building, however,
are only taxable if
the store has eating
facilities.

Nontaxable Items
While the list below is not all-inclusive, it
illustrates the types of products that are not
subject to sales tax.

Bakery Items

Tax is not due on bakery items such as cookies,

doughnuts, bread and tortillas, unless sold
with eating utensils.

Coffee, Tea and Milk Products

Tax is not due on coffee, tea or milk products,

unless sold in a heated state or in a cup or glass
or with a straw.

Newspapers

To be nontaxable, newspapers must be printed

on newsprint, distributed at intervals of four
weeks or less, sold for an average price of
$1.50 or less per day over a 30-day period
and must provide general interest news and
advertisements. Publications that do not meet
all of these criteria are taxable.

Lone Star Card Food Stamps

Anything that can be bought legally with the

Lone Star Card is not taxable. For example,
candy, soft drinks and ice are usually taxable,
but are nontaxable
if bought using the
Lone Star Card. If a
customer buys milk,
fruit, bread, soft
drinks and candy
and pays with the
Lone Star Card
and cash, the Lone
Star Card should
first be used to pay
for the soft drinks
and candy. In other
words, sales tax
is not due on the
candy and soft
drinks as long as they are purchased with the
Lone Star Card.

Over-the-Counter Drugs and Medicines

Over-the-counter drugs and medicines that are

required by the Food and Drug Administration
(FDA) to be labeled with a Drug Facts panel
are not taxable. For more information, see
Sales Tax Exemptions for Over-the-Counter
Drugs and Medicines (Publication 94-155).
For more information,
visit our website
www.window.state.tx.us.
Receive tax help at
https://www.window.
state.tx.us/taxhelp/.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

Examples of Taxable Items

adhesive tape
alarm clocks
ale
aluminum foil
ammonia
ammunition
appliances
automotive items (oil,
transmission fluid,
antifreeze, etc.)
baby care products (oil,
lotion, powder, etc.)**
baby clothing
bags
baskets
batteries
beauty supplies
beer
birdseed (except wild
birdseed)
bleach
books
breath mints
brooms
brushes
bubble bath
calendars
cameras
candles
candy*
canning supplies
carbonated beverages*
cards
cassette tapes
charcoal briquettes
charcoal lighter fluid
Christmas trees and
decorations
cigarettes
cigarette lighters
cleaners
clothespins
clothing
coffee pots
cologne
contact lens care
items***
cosmetics
costumes
cotton balls***
cough drops**
dental floss
detergent

deodorant (not including

antiperspirant)
deodorizers
diapers
diluted juices (50 percent
or less fruit juice)*
dishcloths and towels
dishes
disinfectant
distilled spirits
drinks (soft drinks
canned, bottled, frozen
or powdered, including
all ades and punches)*
dye
eating utensils
electrical supplies
electronic equipment
eyeglasses
fabric softeners
fertilizer
film
fishing tackle
firearms
flashlights
floor wax
flower seeds
flowers
flyswatters
freezer paper and tape
furniture
fuses
garbage bags
garden supplies
gift wrap
glassware
gum
hair care products
(shampoo, spray,
conditioner, etc.)
hair coloring
hairpins and accessories
hammers
hardware
housewares
ice
ice chests
ice cream salt
ice cream sundries (sold
individually; not taxable
when sold in packages
of two or more)
insecticides
irons

jars
jewelry
keys
kitchenware
laundry detergent and
additives
lawn chairs
light bulbs
liquor
lotions**
lubricants
lye
matches
magazines
mops, mop handles and
mop heads
mothballs and spray
motor oil
mousetraps
movies
nails
notebooks
nuts (candy-coated)*
nursery stock (except
annual vegetable plants)
paper items (all)
paraffin
peat moss
pencils and pens
perfume
pet food
pet supplies
photo processing
pictures and frames
pipes
plastic items
poisons
polish
popsicles
popcorn (when candycoated or sold hot in the
store)
pots and pans
powder (face, body and
cleaning)
prophylactics
razors and blades
rental items
ribbons
sandwiches (except
frozen)
sandwich bags
school supplies
scouring pads

shaving cream and lotion

shampoo and rinses
shoelaces
silverware
snuff
socks
soap and detergent
soft drinks (carbonated
and non-carbonated)*
sponges
sports equipment
sprays
starch
stationery and cards
sunglasses
tape (packaging)
tape recorders
thread and sundries
toilet tissue
tools
toothbrushes
toothpaste (nonfluoride)**
toothpicks
toys
tobacco products
towels
videotape (sales and
rentals)
watches and clocks
water softeners
water softener salt
wax removers
whisk brooms
wine
wire
water (when flavored)

* Unless purchased with

food stamps or the Lone
Star Card
** Unless required by the
FDA to be labeled with a
Drug Facts panel or sold
to an individual with a
prescription
***Unless the customer
presents an exemption
certificate stating that the
cotton balls will be used
exclusively for wound care

Grocery and Convenience Stores: Taxable and Nontaxable Sales

Examples of Nontaxable Items

Baby Products

baby food canned,

packaged, etc.
milk canned, dry, etc.
formula
medicated products

Bakery Items fresh,

canned, or frozen

biscuits
bread
cakes
cookies
croutons (plain and
seasoned)
dinner rolls
doughnuts
pies
pizza crusts
soft pretzels
tortillas

Baking Supplies

almond paste, marzipan

baking chocolate
(blocks and chips)
cake mixes
canned fillings
cookie mixes
cooking oils, shortening
and lard
cornmeal
dried fruits
edible cake decorations
(sprinkles, confetti, etc.)
flour
food coloring (liquid,
gel and powdered)
icing and icing mixes
leavening agents
(baking powder, baking
soda, yeast)
marshmallows
molasses
muffin mixes
nuts (not candy-coated)
seasonings (salt, pepper,
herbs, spices, etc.)
spices
sugar
sugar substitutes
syrups

Condiments and
Spices

catsup
herbs
mayonnaise
mustard
pickle relish
pickles
salad dressings (mixes
or bottled)
salsas (canned and fresh)
sauces and liquid
seasonings (fresh,
canned and bottled)
spices
vinegar

Dairy Products

butter and margarine

cheese and cheese foods,
including cottage cheese
and cream cheese
cream (whipping, half
and half, heavy, etc.)
creamers
lactose-reduced milks
and dairy products
milk and milk substitutes
(canned and dry)
sour cream
yogurt

Beverages

coffee (beans, ground

and instant)
coffee flavorings
(powdered and liquid)
fruit and vegetable
juices (more than
50 percent fruit or
vegetable juice, canned,
bottled or frozen)
meal replacements
tea (including herbal
teas)
water (carbonated or
non-carbonated, nonflavored)

Eggs and Egg

Substitutes

egg substitutes (fresh

and frozen)
fresh eggs

Grains and Pasta

beans
cereals
granola (bulk and
packaged)
pastas (fresh, canned
and dried)
pasta mixes
rice
spaghetti

Ice Cream, Ice Cream

Substitutes and Ice
Cream Sundries

frozen yogurt
ice cream (pint or larger
containers)
ice cream sundries
(ice cream bars, ice
cream sandwiches, etc.
sold in prepackaged
units containing two
or more sundries.
Popsicles that are not
ice cream sundries are
taxable regardless of the
quantity in a package
unless the popsicles are
more than 50 percent
juice.)
sherbet

Meat, Poultry
and Fish

canned meats
dried meats
deli meats
fresh and frozen beef,
poultry, pork and fish
lunch meats
meat substitutes
sausages

Nutritional Supplements (product must

contain a Supplement
Facts panel)
herbal products
mineral products
vitamins

Over-the-Counter
Drugs and Medicines
(When required by the
FDA to be labeled with
a Drug Facts panel)

acne treatment products

allergy treatment
products
analgesics
antacids
antibacterial personal
care items (hand
sanitizer, wipes, soap
antibiotic topical
ointment
anti-diarrhea and antinausea products
anti-fungal products
antihistamines
antiperspirants
antiseptic sprays,
creams and lozenges
cold remedies
cough suppressants
dandruff products
expectorants
head lice treatments
hemorrhoid treatments
insect bite treatments
laxatives
nicotine gum or patches
and smoking cessation
aids
pain relievers
(aspirin, ibuprofen,
acetaminophen)
sedatives and sleep aids
sunscreen
toothache treatments

Grocery and Convenience Stores: Taxable and Nontaxable Sales

Examples of Nontaxable Items (cont.)

Produce

canned fruits and

vegetables
dried fruits and
vegetables
fresh fruits and
vegetables (bulk,
wrapped or packaged)
frozen fruits and
vegetables

Other Categories

frozen meals
meal replacements
(bars, powders and
drinks)
packaged mixes for beef,
fish, pork and poultry
packaged mixes for
vegetables, beans and rice
sauces (pasta, tomatoes,
garlic)
soups (canned, dry mix
or frozen)

Snacks

breakfast bars
chips
crackers
granola bars
nuts (not candy-coated)
popcorn
pretzels
protein, nutrition or
sports bars (unless labeled
and marketed as candy)
snack mix
trail mix
yogurt bars

Wound Care Items

adhesive
bandages(including
strip adhesive bandages,
large adhesive bandages
and butterfly closures)
corn cushions
gauze rolls and pads
liquid bandage products
medical tape

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Texas Comptroller of Public Accounts

Publication #96-280
Revised November 2012
For additional copies write:
Texas Comptroller of Public Accounts
111 East 17th Street
Austin, Texas 78711-1440
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