Most States Offer Tax Breaks For Groceries Holdouts Should Follow Suit
Forty-five states plus the District of Columbia levy general sales taxes. Most have eliminated, reduced, or partially offset the tax as applied to food for home consumption. Of the states with sales taxes:
- Thirty-two states plus the District of Columbia exempt most food purchased for consumption at home from the state sales tax.
- Six states tax groceries at lower rates than other goods. Most recently, Tennessee cut its sales tax on food to 4 percent from 5 percent in 2017 Arkansas cut its rate to 0.125 percent from 1.5 percent in 2019.
- Four states tax groceries at the regular sales tax rate but offer credits or rebates offsetting some of the tax for some parts of the population. These credits or rebates usually are set at a flat amount per family member. As noted, credits are less expensive than a full exemption but also less effective at protecting low-income families from the impact of the tax.
- Three states continue to apply their sales tax fully to food purchased for home consumption without providing any offset for low- and moderate-income families.
Is Food Taxable In Virginia
Every US state makes their own rules and laws around the taxability of certain products. Many states, Virginia included, treat certain food, like groceries, a little differently than other items when it comes to how much sales tax a business should charge.
This post will explain grocery, meal and beverage taxability in Virginia.
Are Groceries Taxable In Virginia
Groceries, or food for home consumption are taxable in Virginia, but at a reduced rate of 2.5% throughout the state.
In Virginia, the definition of food for home consumption includes most staple grocery food items and cold prepared foods packaged for home consumption. Specifically excluded are alcoholic beverages, tobacco, and prepared hot foods sold for immediate consumption on and off the premises.
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Meals Tax Ballot Question
For the purpose of reducing dependence on real estate taxes, shall the Board of Supervisors of Fairfax County, Virginia, be authorized to levy a tax on prepared food and beverages, otherwise known as a meals tax, as allowed by Virginia Code § 58.1-3833, at a rate not to exceed four percent of the amount charged for prepared food and beverages ?
The revenues generated shall be dedicated to the following purposes:
Task Force Final Report
two former chairmen of the Board of Supervisors
- Whether or not to proceed with a referendum for a meals tax
- If it is the recommendation of the group to do so, the task force should recommend the timing for the question to be put to voters
- And the task force should return with a recommendation for how revenue from a meals tax should be used.
the task force makes no recommendation on whether or not to proceed with a referendum. The Board of Supervisors accepted the task forces report and thanked the members for their work
- Background Meals Tax in Virginia
- Meals Tax Referenda
- Meals Tax Referendum Task Force Membership
- Task Force Alternates
- Pros and Cons of a Referendum
- FOR PUTTING THE MEALS TAX TO REFERENDUM
- AGAINST PUTTING THE MEALS TAX TO REFERENDUM
- Timing of the Referendum
- 2014 General Election Congressional Elections
Task Force Purpose
The mission of the task force was to recommend to the Board of Supervisors:
- Whether or not to proceed with a referendum for a meals tax
- If it is the recommendation of the group to do so, the task force should recommend the timing for the question to be put to the voters
- And the task force should return to the Board of Supervisors with a recommendation for how revenue from a meals tax should be used.
Background Meals Tax in Virginia
Meals Tax Referenda
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Meals Tax Collection And Payment
Food establishments must report and pay the amounts collected monthly to the Town of Herndon-Revenue Division. The Meals Tax Remittance Formand payment are due on the 20th of each month for the meal taxes collected during the preceding month. To remit electronically, please complete and email forms first to . The finance department will respond to your email and provide the the information required to make payment . To remit via mail or deliver in person:
Herndon Municipal Center777 Lynn Street, 1st floorHerndon, VA 20170
Total Estimated 2021 Tax Burden
Our income tax calculator calculates your federal, state and local taxes based on several key inputs: your household income, location, filing status and number of personal exemptions. Also, we separately calculate the federal income taxes you will owe in the 2020 – 2021 filing season based on the Trump Tax Plan.
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Explanation Of Meals Tax Referendum
State law authorizes counties, cities, and towns to levy a tax on prepared food and beverages, commonly called a meals tax, subject to certain restrictions. Most counties, including Fairfax County, may levy a meals tax only if the voters approve the tax by referendum.
The question presented in this referendum asks Fairfax County voters whether the Board of Supervisors should be authorized to levy a meals tax, as allowed by Virginia Code § 58.1-3833, at a rate not to exceed four percent of the amount charged for the taxable food and beverages. The Board of Supervisors has decided to dedicate the revenues to two purposes, which are specified in the ballot question. First, 70 percent of the net revenues would be dedicated to Fairfax County Public Schools. Second, 30 percent of the net revenues would be dedicated to County services, capital improvements and property tax relief.
The tax would apply to prepared food and beverages at restaurants and similar establishments, although the law carves out some exceptions where the tax would not apply. It would apply to beverages, both alcoholic and non-alcoholic, that are served with a meal. It would not apply to groceries. Grocery and convenience stores would only collect the tax on ready-to-eat foods, like foods from the delicatessen. On a $5 meal, the meals tax would be $.20. On a $50 meal, the meals tax would be $2. A meals tax applies in addition to other applicable taxes, such as sales taxes.
States That Still Impose Sales Taxes On Groceries Should Consider Reducing Or Eliminating Them
“Thirteen of the 45 states with a sales tax still impose it on groceries.”State policymakers looking to make their tax codes more equitable should consider eliminating the sales taxes families pay on groceries if they havent already done so, or at least reducing these taxes or partially offsetting them through a tax credit. Thirteen of the 45 states with a sales tax still impose it on groceries. Of those, ten offer a lower tax rate for groceries than the general sales tax rate or provide a tax credit to offset some or all of the sales tax on groceries. Only Alabama, Mississippi, and South Dakota still tax groceries at the full state sales tax rate.
Sales taxes on groceries have an especially harmful impact on income and racial inequities since low-income families tend to spend a larger share of their income on groceries. The lowest-income fifth of families spend almost twice the share of their annual income on food at home that the highest-income fifth do: 10.3 percent versus 5.7 percent. Overall, the higher the income bracket, the smaller the share spent on food at home. For the lowest-income families, food at home is the third-highest expenditure category as a share of income, after housing and transportation. For the highest-income families, it is the fifth, after housing, transportation, pension and Social Security contributions, and health care.
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Vending Machine Sales Tax
What is it?
A tax on the sale of merchandise through vending machines. Dealers who place vending machines in locations throughout Virginia are responsible for the paying the tax.
Non-vending machine dealers who sell some of their merchandise through vending machines are subject to the retail sales and use tax, not vending machine sales tax.
- Hampton Roads: 7%Includes the cities of Chesapeake, Franklin, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach, and Williamsburg, and the counties of Isle of Wight, James City, Southampton, and York.
- Northern Virginia: 7%Includes the cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park, and the counties of Arlington, Fairfax, Loudoun, and Prince William.
- Everywhere Else: 6.3%
The tax is based on the cost price of the merchandise sold in the vending machine.
What do you mean by cost price?
The price you pay for the merchandise you put into the vending machine to sell.
What do you mean by manufactured price?
If you make the merchandise you sell in the vending machine, its the costs of making the merchandise: raw materials, labor, overhead, etc.
Which should I use, cost price or manufactured price?
If you make or process the merchandise that goes into the vending machines, use manufactured price. If not, use cost price.
How to register:
How to file and pay:
Overview Of Virginia Taxes
Virginia has a progressive income tax, with a top marginal rate that is slightly lower than the national average. The average sales tax in the state, combining state and average local rates, is the 10th-lowest in the country. Virginias property taxes are also below the national average.
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* These are the taxes owed for the 2021 – 2022 filing season.
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Restaurant Sales Tax By State And City
The tax on restaurant food is almost always in that states Sales and Use Tax, plus whatever the city or countys sales tax is on top of that. Below are some of the most popular state and city restaurant taxes.
Virginia Restaurant Tax: As of January 1st, 2020, the average tax of prepared foods in Virginia is 5%. There is a 2.5% tax on food in general, but in certain counties and cities, restaurants can charge up to 6.5% on top of this depending on where its located. Find out more on Virginias Tax Website.
NYC Restaurant Tax: Being home to some of the worlds best restaurants, it makes sense NYC would also have high taxes. The NYC restaurant tax is 8.875%. This is the combination of New York Citys 4.5% tax on the service, New York States Sales tax of 4%, and the Metropolitan Commuter Transportation Districts tax of 0.375% for total sales. You can find out more at NYC.gov.
California Restaurant Tax: The California Restaurant Tax rate varies depending on what county the establishment is located in. However, it will fall between the range of 7.25% and 10.25%. To find out what it is in your county, check out Californias complete list of City and County Sales & Use Tax Rates.
Massachusetts Restaurant Tax: The Massachusetts tax on meals sold by restaurants is 6.25%, this is true for all cities and counties in MA, including Boston. This must be collected from the purchaser and separately stated and charged on the bill. Learn more about the meals tax on Mass.gov.
City Food & Beverage Tax
The City of Hampton, Virginia, imposes a tax in the amount of 7.5% of any charge upon all food and beverages sold in a food establishment in the City. This tax should be collected by the seller from each person who pays the charge at the time of the sale, and must be remitted to the City no later than the 20th of the month following the month of collection.
“Food and Beverages” include all food and / or beverages, including alcoholic beverages, purchased in or from a food establishment, whether prepared in such establishment or not, and whether consumed on the premises or not, and without regard to the manner, time or place of service.
“Food Establishments” include any place in or from which food or beverages, or both, are sold in the City, including, but not limited to:
- Any restaurant
- Lounge or other similar establishment, public or private
- Lunch counter
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The Virginia Income Tax
Virginia collects a state income tax at a maximum marginal tax rate of %, spread across tax brackets. Unlike the Federal Income Tax, Virginia’s state income tax does not provide couples filing jointly with expanded income tax brackets.
Virginia’s maximum marginal income tax rate is the 1st highest in the United States, ranking directly below Virginia’s %. You can learn more about how the Virginia income tax compares to other states’ income taxes by visiting our map of income taxes by state.
There are -875 days left until Tax Day, on April 16th 2020. The IRS will start accepting eFiled tax returns in January 2020 – you can start your online tax return today for free with TurboTax .
Bonds For Fiduciary Taxes
Any business more than two months past due in the payment of admissions, meal sales, or transient lodging taxes may be required to post a bond for these taxes. Since fiduciary taxes collected from customers are held in trust by the business owner, they should not be commingled with the business’ operating funds.
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Consumer’s Use Tax For Businesses
The consumer’s use tax applies to tangible items used, consumed, or stored in Virginia when the Virginia sales or use tax was not paid at the time of purchase. The use tax is computed on the cost price of the property, which is the total amount for which the property was purchased, including any services that are a part of the purchase, valued in money or otherwise, and includes any amount for which credit is given the purchaser or lessee by the seller.
Returns are due on the 20th day of the month after the filing period. You dont have to file for any periods that you dont owe tax. File by including the taxable items on your regular sales tax return, or you can file using the eForm ST-7.
Meals And Prepared Food Tax
The City of Martinsville imposes a local tax on all prepared meals and beverages sold for immediate consumption either on or off the seller’s premises. The tax is collected by every restaurant, caterer, convenience store, grocery delicatessen, etc. engaged in the business of selling prepared food and beverages in Martinsville.
These businesses must register with the Commissioner of the Revenue, collect the tax, in trust, and report and remit the meals tax by the twentieth day of each month following the month of the sale. A 10% penalty is imposed on late filings that are less than 30 days late. An additional 10% penalty is imposed on late filings 31-60 days late, and a maximum 25% penalty is imposed for late filing more than 60 day’s late.
The tax rate is 7% of the total cost of the prepared food or beverage. Prepared food and beverage items are also subject to the 5.3% Virginia Retail Sales and Use Tax.
City of Martinsville Meals Tax remittance forms may be downloaded from the link below:
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Sales Tax Exemptions And Exceptions
In many cases, in order to sell, lease, or rent tangible personal property without charging sales tax, a seller must obtain a certificate of exemption from the buyer. The sales-for-resale exemption prevents tax from being charged multiple times on the same item. The sales tax should be applied on the final retail sale to the consumer. The exemption prevents the tax being applied on goods as they are distributed before being sold at retail.
A dealer who makes a sale without charging applicable sales tax must retain a copy of the exemption certificate on file to substantiate the sale was tax exempt under the law.
- To apply for a cigarette resale exemption certificate or to learn more about the process, go to Cigarette Resale Exemption Certificates.
Virginia Sales and Use Tax Dealer Lookup
If your business is registered as a retail sales tax dealer with us, you can use the Virginia Sales and Use Tax Dealer Lookup through your online business account to verify that a business providing you with a sales tax exemption certificate is currently registered as a retail sales tax dealer in Virginia. If you dont have an account, youll need to create oneto use the tool. You can also call Customer Services at to check.
Tax On Restaurant Tips
Because its hard to know just exactly how much a server will make in tips, the taxes on tipping in restaurants can be confusing. For the best results, youll want to record both cash tips and those logged in the restaurant POS. From daily tip intakes, to how much employees are splitting amongst each other. If a server doesnt make more than $20 per month, they dont need to report it, but a server will be taking home more than that per month. For more on the Employers responsibilities handling this, check out the official page on Tips being Taxed from the IRS.
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Tips And Tricks From Experts On Restaurant Taxes
With many cities and states in the U.S. regulating taxes in their own way, restaurants can end up muddling through confusing layers and rate structures.
Forty-five states and the District of Columbia have sales taxes, and countless local jurisdictions also have sales taxes in various forms, says BDO USA managing director Mike Feiszli, who advises national restaurant clients on a range of tax and financial consulting services. With so many tax codes, tax bases, definitions, exemptions, and tax rates in various combinations, no two tax codes or jurisdictions are exactly the same.
He continues, pointing out that the confusion extends to restaurants in particular: At the same time, different government bodies have different tax rates for restaurant sales for the same reasons there are different tax rates for sales of other tangible personal property or taxable servicesthe state may tax certain sales, while other local taxing authorities may not, or vice versa.
For example, different jurisdictions define taxable food differently, as well as the taxability of beverages that are sold with food, meaning they may all have different tax rates.
Depending upon the jurisdiction, the state may have the authority to levy the sales tax, or even multiple taxes, in addition to the state.
Indirectly, she adds, research shows that as the economy tightens, people go out less often.