Does Illinois charge the low 1% food tax rate on fresh culinary herb plants sold in grocery stores, or the regular 6.25% rate?

Plain-English summary

The Illinois Department of Revenue ruled that fresh culinary herb plants sold in a grocery store's produce section for human consumption qualify for the low 1% Retailers' Occupation Tax rate rather than the regular 6.25% general merchandise rate.

The requesting company, a food retailer, sold assorted fresh culinary herb plants (basil, parsley, rosemary, mint, cilantro, and similar herbs) either potted in a small amount of dirt or bare-root in a plastic bag with a few ounces of water. The packaging told buyers not to plant the herbs in soil, showed a measuring cup and cooking-related imagery, and pictured the herb being added to food.

Under 86 Ill. Adm. Code 130.310, "food" includes anything intended by the seller primarily for human internal consumption -- including spices and seasonings -- and food for consumption off the premises where it's sold is taxed at the low rate, while food prepared for immediate consumption, soft drinks, candy, and similar items are taxed at the high rate. The Department found that the seller's packaging and marketing clearly showed these herb plants were intended for eating, not for planting outdoors as garden or decorative plants, so they met the definition of food and qualified for the low rate -- assuming the store meets the other requirements in the regulation (such as not being set up for on-premises consumption without separate accounting).

What this means for you

Grocery and produce retailers

If you sell fresh culinary herbs in pots or bare-root bags in your produce section, marketed for cooking and eating rather than for planting in a garden, this ruling supports taxing them at the low 1% food rate. The key facts the Department relied on were the packaging language ("do not plant in soil"), cooking-related imagery, and the small, non-garden format of the product -- decorative plants, hanging baskets, and plants meant for outdoor planting are still taxed at the high rate.

Grocery stores with in-store dining or seating

The low rate for food only applies if the store isn't presumed to sell everything at the high rate. If your store provides seating or facilities for on-premises consumption, all food sales are presumed taxable at the high rate unless you (1) physically separate or otherwise distinguish the dining area from the area selling food not for immediate consumption, and (2) keep separate records of receipts from food prepared for immediate consumption versus food sold for off-premises consumption.

Accountants and tax professionals

This PLR is a useful data point for classifying borderline "plant" products at the point of sale, but it binds the Department only as to the requesting taxpayer and only to the extent the facts recited (packaging, marketing, in-store placement) are accurate and complete. It expires 10 years from the April 7, 2021 issuance date, or earlier if the underlying law or facts change, per 2 Ill. Adm. Code 1200.110(e).

Common questions

Q: Are all herb plants sold in a grocery store taxed at the low food rate?
A: Not automatically. This ruling turned on specific facts: the herbs were sold in small pots or bare-root bags (not garden-ready plants), displayed in the produce section, and packaged/marketed for cooking and eating (e.g., "do not plant in soil," cooking imagery). Decorative plants, hanging baskets, and plants intended for outdoor garden planting are taxed at the high rate.

Q: What's the difference between the low rate and the high rate in Illinois?
A: Food for human consumption to be eaten off the premises where it's sold is generally taxed at 1% (plus applicable local taxes), while candy, soft drinks, food prepared for immediate consumption, and general merchandise are taxed at the 6.25% "high" or general merchandise rate.

Q: Can other retailers rely on this ruling for their own herb-plant sales?
A: No. A Private Letter Ruling binds the Department only with respect to the specific taxpayer who requested it, and only to the extent the facts in the ruling are correct and complete. Other retailers with similar products should request their own PLR or consult a tax professional, since small factual differences (packaging, placement, marketing) could change the outcome.

Q: Does having a seating area in the store change the answer?
A: It can. If a grocery store provides facilities for on-premises food consumption, there's a presumption that all food sales are taxed at the high rate, unless the retailer separates the dining area from the rest of the store and separately tracks receipts for immediate-consumption sales versus off-premises sales.

Citations and references

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposed on retail sales of tangible personal property)
• 86 Ill. Adm. Code 150.101 (Use Tax imposed on tangible personal property purchased at retail)
• 86 Ill. Adm. Code 150.130 (retailer's credit against Use Tax for Retailers' Occupation Tax paid)
• 86 Ill. Adm. Code 130.310 (Food, Soft Drinks and Candy -- definition of food, high vs. low tax rates)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures and expiration)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedures)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2021.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2021/st21-0002-plr.pdf

Original ruling text

ST 21-0002 04/07/2021 RETAILERS’ OCCUPATION TAX
Fresh culinary herb plants sold for the purpose of human consumption are
subject to the low rate of Retailers’ Occupation Tax. See 86 Ill. Adm. Code
130.310. (This is a PLR.)

April 7, 2021
Dear NAME:
This letter is in response to your letter dated December 16, 2020, 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.
Review of your request disclosed that all the information described in paragraphs
1 through 8 of Section 1200.110 appears to be contained in your request. This Private
Letter Ruling will bind the Department only with respect to COMPANY, for the issue or
issues presented in this ruling, and is subject to the provisions of subsection (e) of
Section 1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling
is conditioned upon the understanding that neither COMPANY, nor a related taxpayer is
currently under audit or involved in litigation concerning the issues that are the subject
of this ruling request. In your letter you have stated and made inquiry as follows:
COMPANY is a STATE based corporation and does business as a food
retailer in Illinois. We would like to request a private letter ruling as to
whether or not culinary herb plants sold for the purpose of human
consumption are subject to the low rate of the Retailer’s Occupation Tax.
COMPANY is not currently under audit by the Illinois Department of
Revenue.
Per the requirements of Title 2 Part 1200 Section 1200.110(b):
1) Statement of Facts

COMPANY
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April 7, 2021
Our company sells assorted fresh culinary herb plants in our produce
departments either in a small pot containing dirt or bare root in a plastic
bag containing a few ounces of water.
Illinois Administrative Code Section 130.310(a) defines food as:
“With respect to food for human consumption that is to be consumed off
the premises where it is sold (other than alcoholic beverages, food
consisting of or infused with adult use cannabis, soft drinks, candy and
food that has been prepared for immediate consumption), the tax is
imposed at the rate of 1%. Food for human consumption that is to be
consumed off the premises where it is sold includes all food sold through a
vending machine, except soft drinks, candy, and food products that are
dispensed hot from a vending machine, regardless of the location of the
vending machine.”
In previous audits, the Illinois Department of Revenue has indicated that
packaged fresh cut herbs (no roots) were subject to the low rate of tax,
and plants such as decorative indoor plants, hanging baskets and plants
intended to be planted in gardens were subject to the high rate of tax.
A package of PRODUCT Basil is shown in exhibits 1 & 2. The package
directions specifically say “Do not plant in soil…”
A package of potted Organic Italian Parsley is shown in exhibits 3 – 5.
This particular line of products includes other varieties of culinary herbs,
such as rosemary, mint, basil, cilantro, etc. Exhibit 3 shows the plant as
sold in a plastic bag. Exhibit 4 shows the front of the plastic bag with the
plant removed. Exhibit 5 shows the back of the plastic bag with the plant
removed.
2) We submit Exhibits 1-5, product pictures, as the only other documents
relevant to this request.
3) The tax period at issue is all time periods on and after the date of the
Department’s private letter ruling.
4) To the best of our knowledge, the Department has not previously ruled
on this or a similar issue for COMPANY. We have not previously
requested and subsequently withdrawn a ruling request on this issue.
5 & 6) To the best of our knowledge, no State of Illinois authority has
issued an opinion as to whether or not the products in question meet the

COMPANY
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April 7, 2021
legal definition of food for human consumption for the purpose of the
Retailers’ Occupation Tax.
7) This request contains no trade secrets
DEPARTMENT’S RESPONSE:
The Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property at retail 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.
The Department’s regulation governing food is found at Section 130.310 (“Food, Soft
Drinks and Candy”). 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. See 86 Ill. Adm. Code
130.310(c)(1). Food can be taxed at either the State general merchandise, or “high” rate (6.25%)
or a preferential low rate of 1% (plus any applicable local taxes). As Section 130.310 explains,
the applicable tax rate depends upon several factors. However, certain items are always taxable
at the high rate, such as candy, soft drinks and “food prepared for immediate consumption.” The
latter term is explained in greater detail at subsection (c)(2)(A)(i) through (iv) of the regulation.
Food for human consumption that is to be consumed off the premises where it is sold is taxed at
the rate of 1%. See 86 Ill. Adm. Code 130.310(a).
The manner in which food is taxed depends upon two distinct factors that must both be
considered in determining if food is taxed at the high rate as "food prepared for immediate
consumption" or the low rate as "food prepared for consumption off the premises where sold.”
See 86 Ill. Adm. Code 130.310(b). The first factor is whether the retailer selling the food
provides premises for consumption of food. The second factor is the nature of the food item
being sold. See id. With regard to grocery stores, if retailers provide facilities for the onpremises consumption of food, a presumption is created that all sales of food are taxable at the
higher rate. However, this presumption can be rebutted if the following two criteria are
demonstrated:

1. The area for on-premises consumption is physically separated or otherwise
   distinguishable from the area where food not for immediate consumption is sold; and

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April 7, 2021

2. The retailer utilizes a means of recording and accounting for collection of receipts
   from the sales of food prepared for immediate consumption (high rate) and the sales
   of food that are not prepared for immediate consumption (low rate).
   If a retailer does not provide seating or facilities for on-premises consumption of food, then the
   low rate of tax will be applied to all food items except for "food prepared for immediate
   consumption by the retailer" as provided in section 130.310(b) and soft drinks, candy and
   alcoholic beverages. However, for the low rate of tax to apply, retailers that sell both food
   prepared for immediate consumption and food for consumption off the premises where sold must
   utilize means of recording and accounting for collection of receipts from the sales of food
   prepared for immediate consumption (high rate) and the sales of food that are not prepared for
   immediate consumption (low rate). If these receipts are not maintained, all sales will be
   presumed to be at the high rate of tax. See 86 Ill. Adm. Code 130.310(d)(2).
   In your letter, you have requested a ruling as to whether fresh culinary herb plants sold
   for the purpose of human consumption are subject to the low rate of Retailers’ Occupation Tax.
   The ruling on this issue is especially specific to the facts as stated in your letter. The fresh
   culinary herb plants at issue are sold either in a small pot containing dirt or with bare roots in a
   plastic bag containing a few ounces of water. These plants are displayed in the produce section
   of your grocery stores. Additionally, the plants’ packaging states, “Do not plant in soil,” “up to 2
   cups” next to a picture of a measuring cup commonly used in cooking, “That’s Tasty,” “Indoor
   grown,” and includes a picture of the herb being added to a plate of food for human
   consumption. Our understanding is that these plants are not intended for planting outdoors.
   It is the Department’s opinion, after reviewing the information in your letter and the
   additional materials submitted, that the seller clearly intends these plants to be used for human
   internal consumption. Therefore, these culinary herb plants meet the definition of food pursuant
   to Section 130.310(c)(1). Moreover, the plants are not prepared for immediate consumption and
   are intended for consumption off the premises where sold. Assuming the other criteria in Section
   130.310(b) and (c) are met, the store should charge the low rate of tax on sales of these culinary
   herb plants.
   The factual representations upon which this ruling is based are subject to review by the
   Department during the course of any audit, investigation, or hearing and this ruling shall bind the
   Department only if the factual representations recited in this ruling are correct and complete.
   This Private Letter Ruling is revoked and will cease to bind the Department 10 years after the
   date of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a
   pertinent change in statutory law, case law, rules or in the factual representations recited in this
   ruling.
   I hope this information is helpful. If you have further questions concerning this Private
   Letter Ruling, you may contact me at (217) 782-2844. If you have further questions related to the
   Illinois sales tax laws, please visit our website at www.tax.illinois.gov or contact the
   Department’s Taxpayer Information Division at (217) 782-3336.

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April 7, 2021

Very truly yours,

Richard S. Wolters
Chairman, Private Letter Ruling Committee
RSW:rkn