Did prepackaged ice cream sold from an Illinois ice cream truck qualify for the lower food-tax rate?

Plain-English summary

The Department said an ice cream truck generally incurred the higher food-tax rate on prepackaged ice cream because the product was sold for immediate consumption. Under the 2010 rules, that meant the 6.25% state rate plus applicable local taxes rather than the 1% state rate for qualifying food sold for off-premises consumption.

The GIL explained the broader framework. Food for off-premises consumption generally received the lower rate, except alcoholic beverages, candy, soft drinks, and food prepared for immediate consumption. Sellers with eating facilities generally used the higher rate unless their grocery area was physically partitioned and separately recorded. Sellers without eating facilities looked to whether more than half of food sales were grocery-type sales or immediate-consumption sales.

For this request, the Department did not analyze the truck's full sales mix or returns. It gave the general conclusion that an ice cream-truck retailer sells for immediate consumption and therefore incurs the higher rate.

What this means for you

A product being prepackaged does not automatically produce the lower food rate. Mobile vendors should document what they sell, whether items are intended for immediate consumption, and the current state and local rates.

Common questions

Q: Did the fact that the ice cream was prepackaged make it low-rate grocery food?
A: No. The Department focused on the immediate-consumption nature of ice cream-truck sales.

Q: Are the rates in this 2010 letter current?
A: The GIL states the rates that applied in 2010. Verify current state and local rates before filing returns.

Citations and references

• 86 Ill. Adm. Code 130.310(a), (b)(3), and (b)(6) (food-tax rates and immediate consumption)
• 2 Ill. Adm. Code 1200.120 (GILs)

Subject

Food

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0078.pdf

Original ruling text

ST 10-0078-GIL 08/27/2010 FOOD
This letter provides a brief summary of when the high rate of tax for food and the low rate of
tax for food apply. See 86 Ill. Adm. Code 130.310. (This is a GIL.)

August 27, 2010

Dear Xxxxx:
This letter is in response to your letter dated August 3, 2010, in which you request information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
I need some clarification as to which rate I should be using when reporting my monthly
sales tax. I have been told I qualify for the lower food rate, but have also been told I
could possibly fall into a higher rate of general merchandise.
I operate an ice cream truck and sell pre-packaged ice cream purchased from an ice
cream distributor.
I am not sure what other information you need. Please review and advise so I know
whether or not the returns I have filed can stay as is, or if I need to amend them.

DEPARTMENT’S RESPONSE:
Food sold at retail in Illinois is subject to Retailers’ Occupation Tax and Use Tax. Items that
qualify as food, drugs and medical appliances are taxed at the low State rate of 1%. The
Department’s regulation regarding the appropriate tax rates for food can be found at 86 Ill. Adm.
Code 130.310.
Food that is to be consumed off the premises where it is sold (other than alcoholic beverages,
candy, soft drinks, and food that has been prepared for immediate consumption) is taxed at the rate
of 1% plus applicable local taxes. Food is defined as any solid, liquid, powder or item intended by the

seller primarily for human internal consumption, whether simple, compound or mixed, including foods
such as condiments, spices, seasonings, vitamins, bottled water and ice. Candy is defined as a
preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate,
fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. Candy does not
include any preparation that contains flour or requires refrigeration.
The manner in which food is taxed depends upon the nature of the establishment that is selling
the food. Retailers who provide seating or facilities for on-premises consumption of food generally
incur tax at the high rate (6.25% State rate) on all food sales (including bulk or grocery type items).
However, if establishments sell both food that has been prepared for immediate consumption and
bulk or grocery type items and also provide facilities for on-premises consumption, the lower rate of
tax (1%) may be charged on the bulk or grocery type items (other than alcoholic beverages, candy,
soft drinks, and food that has been prepared for immediate consumption) if the dining facilities are
physically partitioned from the area where food not for immediate consumption is sold and these
facilities utilize a separate means of collection of receipts. See 86 Ill. Adm. Code 130.310(b)(3).
The Department generally relies on the plain meaning of the term “physically partitioned” as in
separated or divided by a tangible barrier. An eat-in-area that is partially isolated from the generally
sales area of a store by the arrangement of display cases, service counters, or stub walls would
qualify as “physically partitioned.” If establishments have no seating or facilities for on-premises
consumption of food, the tax rate incurred on food sales is determined by whether the majority (over
50%) are bulk or grocery type sales or are sales for immediate consumption. If more than 50% of all
food sales are for immediate consumption, the retailer must charge the high rate on all food sales. If
more than 50% of all food sales are bulk or grocery type items, all food sales are taxed at the low rate
with the exception of hot foods, food that has been prepared for immediate consumption, alcoholic
beverages, candy and soft drinks. See Section 130.310(a). Food for immediate consumption is
defined in the regulation as hot food and food made ready by the retailer to be eaten without
substantial delay after the final stage of preparation by the retailer. See 86 Ill. Adm. Code
130.310(b)(6).
Based on the forgoing, generally a retailer that sells ice cream from a truck is selling the ice
cream for immediate consumption and would incur tax at the high rate (6.25% State rate) plus
applicable local taxes.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk