Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 220 - Exemptions Primarily of Benefit to Consumers › Rule 701-220.5 - Sales of Prepared Food

Current through Register Vol. 47, No. 3, July 24, 2024
On and after July 1, 2004, sales of "prepared food" are
				  subject to tax as such sales were taxable prior to that date. However, before
				  and after that date, the definitions of "prepared food" differ slightly.
				  Reference rule 701-20.5 (423) for a description
				  of the taxation of "prepared food" prior to July 1, 2004.
(1)
Prepared food.
a. On and after July 1, 2004, "prepared food"
				means any of the following:
(1) Food sold in
				a heated state or heated by the seller, including food sold by a
				caterer.
(2) Two or more food
				ingredients mixed or combined by the seller for sale as a single
				item.
(3) Food sold with eating
				utensils provided by the seller, including plates, knives, forks, spoons,
				glasses, cups, napkins, or straws. A plate does not include a container or
				packaging used to transport food.
The types of retailers who are generally considered to be
				  offering prepared food for sale include restaurants, coffee shops, cafeterias,
				  convenience stores, snack shops, and concession stands including those at
				  recreation and entertainment facilities. Other retailers that often offer
				  prepared food include vending machine retailers, mobile vendors, and
				  concessionaires operating facilities for such activities as education, office
				  work, or manufacturing.
If food is sold for consumption on the premises of a
				  retailer, the food is rebuttably presumed to be prepared food. "Premises of a
				  retailer" means the total space and facilities under control of the retailer or
				  available to the retailer, including buildings, grounds, and parking lots that
				  are made available or that are available for use by the retailer, for the
				  purpose of sale of prepared food and drink or for the purpose of consumption of
				  prepared food and drink sold by the retailer. Availability of self-service
				  heating or other preparation facilities or eating facilities such as tables and
				  chairs and knives, forks, and spoons, indicates that food, food products, and
				  drinks are sold for consumption on the premises of the retailer and are subject
				  to tax as sales of prepared food.
The following examples are intended to show some of the
				  situations in which sales are taxable as sales of prepared food and
				  drink.
EXAMPLE A. A movie theater owner operates a movie theater and
				  a concession stand in the lobby of the theater. There is not a separate area
				  set aside for eating facilities. Sales of prepared food and drink through the
				  concession stand are taxable.
EXAMPLE B. As a convenience to employees, a manufacturer owns
				  and operates several food and drink vending machines located on the premises of
				  the plant. No separate seating or other facilities for eating are provided.
				  Sales of prepared food and drink through the vending machines are
				  taxable.
EXAMPLE C. Mobile vendor units located throughout an office
				  are operated by the owner of the business and are stocked with snack food
				  priced to cover the cost of the items to the employer. No separate eating
				  facilities are provided. Sales of prepared food through the mobile vendors are
				  taxable.
EXAMPLE D. An insurance company hires a caterer to run a
				  cafeteria which provides food, at a low cost, to its employees. The insurance
				  company also pays the caterer an amount, per month, which varies with the
				  number of meals the caterer serves to provide this food service. The caterer
				  does not lease the cafeteria premises; thus the premises remains under the
				  control of the insurance company. In this case, the caterer sells the food in a
				  space made "available to the retailer [caterer]," and the amount which the
				  insurance company pays, on a monthly basis, to the caterer is presumed to be
				  the taxable sales price from the sale of prepared food, as well as the amount
				  paid by the employees to the caterer.