What does Illinois General Information Letter ST 19-0004-GIL conclude about Food?

Plain-English summary

A tax preparer asked the Illinois Department of Revenue what sales tax rate applies to a client's fruit-selling business: a mobile cart selling hand-sliced mango and pineapple cups (with chile powder and lime) in a park, a planned flea-market stand selling blender smoothies and sliced fruit cups, and whole strawberries or grapes bagged in Ziploc bags and peddled on the street.

The Department's answer: the client should be collecting the general merchandise (high) rate, not the low grocery rate, on his food sales. Illinois taxes "food prepared for immediate consumption" -- food the retailer makes ready to eat without substantial delay after the final step of preparation -- at the high rate. Food a retailer sells without preparing it at all (the Department's examples are pre-packaged candy, chips, and snacks) is not "for immediate consumption" and can qualify for the low rate, unless it's meant to be eaten on the vendor's premises. But there's a catch for mixed-inventory vendors: if most of a vendor's sales are prepared, immediate-consumption items, the vendor should charge the high rate on all of his sales, not just the prepared ones.

The Department's letter addresses the general rule rather than walking through each of the four scenarios individually, so here is how that rule applies to the facts given: the hand-cut, seasoned fruit cups and the blender smoothies are clearly "prepared" food, taxed at the high rate. The sliced fruit cups sold at the flea-market stand are prepared the same way, so the same high rate applies. The whole, uncut fruit in Ziploc bags is the closest call -- standing alone, unprepared whole fruit could qualify for the low rate -- but because the facts describe this vendor's food sales as overwhelmingly prepared items, the "majority of sales" rule pulls the bagged whole fruit into the high rate too.

What this means for you

Mobile food vendors and street peddlers

If you cut, slice, blend, season, or otherwise prepare food before selling it, expect to charge the high general merchandise sales tax rate, not the reduced grocery rate. This applies whether you sell from a cart, a flea-market stand, or any other mobile setup. Selling hot food is always taxed at the high rate, regardless of what kind of vendor you are.

Vendors who sell a mix of prepared and unprepared items

Watch the "majority of sales" rule closely. Even if a particular item you sell -- like whole fruit in a bag that you haven't cut or otherwise prepared -- might qualify for the low rate on its own, the Department's guidance says that if most of your sales are prepared, immediate-consumption food, you should charge the high rate across your entire inventory, including the unprepared items.

Accountants and tax preparers

This GIL is a useful reference for how the Department applies 86 Ill. Adm. Code 130.310 to informal, mixed-inventory food vendors (carts, flea-market stands, street peddling), but it is non-binding guidance, not a ruling on your client's specific facts. If a client's situation turns heavily on this "majority of sales" test, consider whether a Private Letter Ruling is warranted for binding certainty.

Common questions

Q: Does slicing or cutting fruit make it "prepared for immediate consumption"?
A: Based on the Department's general rule, yes. "Prepared for immediate consumption" means the retailer has made the food ready to eat without substantial delay after the final preparation step. Hand-slicing fruit, adding seasoning, and packaging it in an individual cup is preparation, so it is taxed at the high rate.

Q: What about food I sell completely untouched, like whole fruit in a bag?
A: Standing alone, food you sell without any preparation -- the Department's examples are pre-packaged candy, chips, and snacks -- is not "for immediate consumption" and may qualify for the low rate, unless it's meant to be eaten on your premises. But this GIL warns that if the majority of your sales are prepared/immediate-consumption items, you should charge the high rate on all your sales, including unprepared items like bagged whole fruit.

Q: Does the type of vendor (cart, flea-market stand, food truck, convenience store) change the answer?
A: No. The Department's letter specifically notes that hot food items are taxed at the high rate "irrespective of whether ... sold by a street vendor, food service truck, or by the convenience store." The prepared-for-immediate-consumption test looks at what you do to the food, not what kind of business you run.

Q: Is this GIL binding on the Department?
A: No. A General Information Letter only directs taxpayers to relevant regulations and other sources of information. It is not a statement of Department policy and is not binding, unlike a Private Letter Ruling, which is binding on the Department for the specific taxpayer and facts involved.

Citations and references

Regulations:

• 86 Ill. Adm. Code 130.101 (imposition of Retailers' Occupation Tax)
• 86 Ill. Adm. Code 130.310 (food prepared for immediate consumption)
• 86 Ill. Adm. Code 150.101 (imposition of Use Tax)
• 86 Ill. Adm. Code 150.130 (Use Tax credit for Retailers' Occupation Tax paid)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0004-gil.pdf

Original ruling text

ST 19-0004-GIL 02/28/2019 FOOD
Food items for immediate consumption are subject to the higher tax rate. See 86 Ill. Adm.
Code 130.310. (This is a GIL.)

February 28, 2019

Dear Xxxx:
This letter is in response to your letter received in this office on February 6, 2019, in which you
requested 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 requesting a letter ruling about sales tax rates. I am a tax preparer and my client
previously paid sales tax on items he sold at the rate of 10.25% but he is stating that he should
be paying tax at the low rate of 2.25%.
My client is a street peddler. He has a mobile cart which he takes to the park and sells fruit
snacks. This item is fruit, mangoes or pineapples, which he slices by hand and puts into
individual 8 oz cups and sprinkles chile powder and lime over them. Customers take these
cups with them to eat the fruit. This item makes up his entire food sales in the park.
Should this be taxed on the ST-1 at the high or low rate?
My client also stated that he is going to begin selling inside of a flea market. He will have a
stand inside of the flea market to sell fruit smoothies which he prepares in a blender and he will
also sell the sliced fruit in a cup?
Are the fruit smoothies taxable at the high or low rate?
Will the sliced fruit be taxable at the high or low rate at the flea market stand?
Lastly, if he peddles on the street and sells fruit (strawberries or grapes) that he puts in 10 oz
Ziploc bags, is this taxable at the high or low rate?
Thank you for your clarification on this. Please send your response to: NAME, ADDRESS.

ST 19-0004-GIL
Page 2

DEPARTMENT’S RESPONSE:
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. Use Tax is imposed on the privilege of using, in this State, any kind of tangible
personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as “sales” tax in Illinois. If the purchases
occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase. The
retailers are then allowed to reduce the amount of Use Tax they must remit by the amount of
Retailers' Occupation Tax liability which they are required to and do pay to the Department with
respect to the same sales. See 86 Ill. Adm. Code 150.130.
Your client should be collecting Retailers’ Occupation Tax at the general merchandise or high
rate. Food vendors should be charging the high rate on all sales of food prepared for immediate
consumption. Food prepared for immediate consumption means food made ready by the retailer to
be eaten without substantial delay after the final stage of preparation by the retailer.
Retailers who sell food that they do not prepare in any way are not selling food for immediate
consumption, i.e., pre-packaged candy, chips, snacks, unless that food is to be consumed on the
retailer's premises. "Premises" means the area over which the vendor exercises control. See, 86 Ill.
Adm. Code 130.310. If the majority of sales made by food vendor are for immediate consumption,
the vendor should assess the high rate of tax on all his transactions.
All food items which are served hot are considered for immediate consumption. Consequently,
irrespective of whether the coffee or hot soup is sold by a street vendor, food service truck, or by the
convenience store, will be taxed at the higher rate.
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:rkn