Which Illinois food-tax rate applied to ice-cream cakes, bulk novelty packages, individual bars, and drive-through prepared food?

Plain-English summary

An owner of three Illinois stores sold prepared food and soft-serve products for immediate consumption, including through drive-through windows. The stores also sold ice-cream cakes, boxes and bulk packages of novelty products, and individual ice-cream bars.

Under the rates stated in this 2013 GIL, a retailer providing on-premises seating generally applied the high 6.25% state rate to all food. Prepared food remained high-rate even when sold through the drive-through for off-premises consumption.

Ice-cream cakes and qualifying bulk packages could receive the low 1% state rate if the dining facilities were physically separated or distinguishable from the grocery-type sales area and the retailer separately recorded and accounted for high- and low-rate receipts. Individual ice-cream bars remained high-rate whether sold inside or at the drive-through.

Common questions

Did off-premises consumption make drive-through food low-rate? No. Food prepared for immediate consumption remained high-rate.

Could ice-cream cakes receive the low rate? Yes, if the store met the physical-separation and separate-accounting requirements.

Citations and references

• 86 Ill. Adm. Code 130.310(b)(1), (c)(2), and (d)(4)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0061.pdf

Original ruling text

ST-13-0061 – GIL 10/22/13 FOOD
This letter discusses the applicable sales tax rates for food. See 86 Ill. Adm. Code 130.310. (This
is a GIL.)
October 22, 2013

Dear Xxxxx:
This letter is in response to your letter dated July 9, 2013, 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 am the owner of three (3) separate entities, each of which owns a retail
COMPANY in the State of Illinois. The entities and their sales tax numbers are
as follows:
Name

Sales Tax Number

ENTITY1

XXXX-XXXX

ENTITY2

XXXX-XXXX

ENTITY3

XXXX-XXXX

Each of these are retail establishments:
1.
Prepares food and soft serve dairy products for immediate consumption on
the premises.
2.
Sells the items referenced in paragraph #1 through the drive-thru window
for consumption off-premises.
3.
Each of these Stores make ice cream cakes, which are displayed in a glass
freezer and/or are made to order based upon a customer’s placing an order. The
customer picks up and pays for each cake at the counter inside the Store and

removes the cake off-premises. The Stores do not have or provide plates,
tableware, etc. so that the cakes may be served on the premises.
4.
Each of these stores purchases manufactured novelties that come in a large
case, and each case includes smaller boxes which contain 6 to 8 separate ice
cream novelty products, such as fudge bars, ice cream 1, vanilla-orange bars, ice
cream sandwiches, and ice cream 2. These are then sold by the box at either the
counter or drive-thru for consumption off the premises.
5.
In regard to the manufactured novelties referenced in paragraph #4, the
Stores separately sell one (1) novelty at a time, after first opening the boxes, for
consumption on premises.
6.
The Stores also manufacture ice cream 1, place them in a fairly tight small
individual bag, and then place 10 of these individual bagged ice cream 1 in a large
sack and sell them in bulk (10 at a time). These are also purchased at the counter
at the store and at the drive-thru. These are not sold for consumption on the
premises.
7.
Each of these COMPANY Stores has a drive-thru where food is passed
through the drive-thru windows into the car and where the customer makes
payment. After payment, the customers drive off in the car and leave the
premises. Some will consume the food in their cars and some will wait to arrive at
their destinations.
Note: It is my information that local grocery stores prepare cakes for resale,
along with various ice cream novelty products in boxes for consumption off the
premises, which products are sold at the low 1% sales tax rate.
I am requesting a ruling in regard to each of the captioned 3 store and related sales
tax numbers concerning the following questions:
1.
Are the ice cream cakes referenced above sold for consumption off
premises subject to the high rate or the low 1% sales tax rate?
2.
Are the boxes of the above referred to ice cream novelty products that are
sold for consumption off the premises subject to the high rate or the low 1% rate.
3
Are the ice cream 1 that we make / manufacture on the premises that are
sold in bags of 10 for consumption off the premises subject to the high rate or the
low 1% sales tax rate?
4.
Are drive-thru sales of prepared food and soft serve products for
consumption off premises subject to the high rate or low 1% rate?
The foregoing requested rulings pertain to Title 86 Part 130 Section 130.310.

I represent unto you that the facts herein contained are true and accurate and that I
am the authorized officer on behalf of each of the 3 entities in order to request
these rulings. Thank you.

DEPARTMENT’S RESPONSE:
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 grocery type
items). However, if establishments sell both food that has been prepared for immediate
consumption and grocery type items and also provide facilities for on-premises consumption, the
lower rate of tax (1%) may be charged on the 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)(1).
Food for immediate consumption is defined in the regulation as 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(c)(2). Foods sold in a restaurant are typically considered
prepared for immediate consumption. See 130.310(d)(4)(C). This would include food sold
through the drive thru window even though it will be eaten off the premises because it is
prepared for immediate consumption. We recognize that you also sell ice cream cakes and prepackaged bulk ice cream items. The regulations address this scenario at 86 Ill. Adm. Code
130.310(b)(1). Ice cream cakes and items sold in bulk such as the boxes of ice cream novelty
products would be taxed at the low rate if you otherwise meet the criteria in 86 Ill. Adm. Code
130.310(b)(1). When a retailer provides on premises seating the low rate only applies to certain
foods if 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
utilizes a means of recording and accounting for collection of receipts from the sales of food
prepared for immediate consumption and the sales of food that are not prepared for immediate
consumption. This can be accomplished simply by using a cash register that separately identifies
high rate and low rate sales or by using separate registers for high rate and low rate sales.
Assuming you meet these criteria, we believe the ice cream cakes and prepackaged boxes of
novelty ice cream products would be taxed at the low rate. The individual ice cream bars that
you sell are subject to tax at the high rate whether they are purchased in the store or in the drivethru. See 86 Ill. Adm. Code 130.310(d)(4)(F) for more information about ice cream and ice
cream cakes.
In sum, if your restaurant has seating for consumption of food, we presume that all of
your sales are taxable at the high rate. If you have a physical separation between the dining area
and the area where you sell food not for immediate consumption and you have a separate means
of recording and accounting the sales receipts of high and low rate foods, the low rate will apply
to qualifying foods that are not prepared for immediate consumption such as ice cream cakes.

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,

Cara Bishop
Associate Counsel
CB:msk