How much is Kansas cutting the state sales tax on food, and what food qualifies?

Plain-English summary

Kansas Notice 22-15 explains the phased cut in the state sales and compensating use tax rate on food and food ingredients, enacted by 2022 House Bill 2106.

The rate steps down. The state rate on food, currently 6.5%, is reduced to:

• 4.0% starting January 1, 2023;
• 2.0% starting January 1, 2024; and
• 0.0% starting January 1, 2025.

Local tax is unaffected. Cities and counties continue to impose their local sales taxes on food and food ingredients at their various rates.

What is "food and food ingredients" (Section 5, K.S.A. 79-3602(n)). Substances sold for ingestion or chewing by humans and consumed for their taste or nutritional value, including bottled water, candy, dietary supplements, food sold through vending machines, and soft drinks -- but not alcoholic beverages or tobacco. The bill also adds definitions of "bottled water," "candy," "dietary supplement," "food sold through vending machines," "prepared food," and "soft drinks."

Prepared food generally excluded. The reduced rate does not apply to "prepared food" -- unless it is sold without eating utensils provided by the seller and falls into a specified category, such as: food sold by a manufacturer in NAICS sector 311 (except bakeries, subsector 3118); food sold unheated by weight or volume as a single item (or only meat or seafood sold unheated by weight or volume); bakery items (bread, rolls, buns, biscuits, bagels, pastries, cakes, pies, cookies, tortillas, and the like); and food that ordinarily requires additional cooking (not just reheating) by the consumer.

Food sales tax credit sunset. The existing income tax credit for food purchases under K.S.A. 79-32,271 (for individual income taxpayers with federal adjusted gross income of $30,615 or less, among other qualifications) is sunset by the bill at the end of tax year 2024.

For examples and more detail, see Department Publication KS-1223, Food Sales Tax Rate Reduction.

What this means for you

Grocers and food retailers

• Charge the reduced state rate on food and food ingredients -- 4% in 2023, 2% in 2024, and 0% in 2025 -- plus any local tax, which does not change.
• "Prepared food" generally stays at the full rate, except for the listed categories (such as bakery items and unheated single items sold by weight or volume); update your point-of-sale system and see Publication KS-1223.

Shoppers

• The state's tax on groceries falls each year and reaches 0% in 2025, but your city and county sales tax on food still applies.
• Individual taxpayers should note the separate food sales tax income credit (K.S.A. 79-32,271) ends after tax year 2024.

Common questions

What is the new state food tax rate? 4% in 2023, 2% in 2024, and 0% in 2025 (down from 6.5%).

Does local sales tax on food change? No -- only the state rate changes; local taxes continue.

Is prepared food included? Generally no; prepared food stays at the full rate except for specified categories such as bakery items and unheated single items sold by weight or volume.

What happened to the food sales tax credit? The K.S.A. 79-32,271 income tax credit is sunset at the end of tax year 2024.

Citations and references

• House Bill 2106 (2022) -- reduced the state sales and use tax rate on food and food ingredients and amended the related definitions.
• K.S.A. 79-3602 -- sales tax definitions; amended definition of "food and food ingredients" and new definitions of bottled water, candy, dietary supplement, prepared food, and soft drinks.
• K.S.A. 79-32,271 -- food sales tax income credit, sunset at the end of tax year 2024.
• Publication KS-1223 -- Kansas Department of Revenue guide to the Food Sales Tax Rate Reduction.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 22-15

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                       NOTICE 22-15

                      KANSAS FOOD SALES TAX RATE REDUCTION

                                    (DECEMBER 1, 2022)

  During the 2022 Legislative Session House Bill 2106 was passed and signed into law.

Beginning January 1, 2023, the Bill reduces the state sales and compensating use tax rate on food
and food ingredients.

    At present, a state sales tax is imposed on food and food ingredients at the rate of 6.5%. In

addition, cities and counties impose local sales tax on food and food ingredients at various local
rates.

   New Section 1 of the Bill provides that, starting on January 1, 2023, the state sales tax rate

on food and food ingredients will be reduced to 4.0%. Starting on January 1, 2024, the state sales
tax rate will be reduced to 2.0%. And, starting on January 1, 2025, the state sales tax rate will be
reduced to 0.0%.

  The rates of local sales taxes, imposed by cities and counties, on food and food ingredients

are not affected by the Bill. Sales of food and food ingredients remain subject to sales taxes
imposed by cities and counties.

   K.S.A. 79-3602 is the definitional statute for the sales tax act. Section 5 of the Bill amends

the definition of "food and food ingredients" found in subsection (n), to provide:

         (n) "Food and food ingredients" means substances, whether in liquid, concentrated,
   solid, frozen, dried or dehydrated form, that are sold for ingestion or chewing by humans and
   are consumed for their taste or nutritional value. "Food and food ingredients" includes
   bottled water, candy, dietary supplements, food sold through vending machines and soft
   drinks. "Food and food ingredients" does not include alcoholic beverages or tobacco.

  New subsections (jjj), (lll), (mmm), (nnn), (ooo), and (ppp) of K.S.A. 79-3602 go on to

provide the following definitions:

        (jjj) (1) "Bottled water" means water that is placed in a safety sealed container or
   package for human consumption. "Bottled water" is calorie free and does not contain
   sweeteners or other additives, except that it may contain:
        (A) Antimicrobial agents;
        (B) fluoride;
        (C) carbonation;

       (D) vitamins, minerals and electrolytes;
       (E) oxygen;
       (F) preservatives; or
       (G) only those flavors, extracts or essences derived from a spice or fruit.
       (2) "Bottled water" includes water that is delivered to the buyer in a reusable container
 that is not sold with the water.
       (lll) (1) "Candy" means 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.
       (2) "Candy" does not include any preparation containing flour and shall require no
 refrigeration.
       (mmm) "Dietary supplement" means the same as defined in K.S.A. 79-3606(jjj), and
 amendments thereto.
       (nnn) "Food sold through vending machines" means food dispensed from a machine
 or other mechanical device that accepts payment.
       (ooo) (1) "Prepared food" means:
       (A) Food sold in a heated state or heated by the seller;
       (B) two or more food ingredients mixed or combined by the seller for sale as a single
 item; or
       (C) food sold with eating utensils provided by the seller, including, but not limited to,
 plates, knives, forks, spoons, glasses, cups, napkins or straws. A plate does not include a
 container or packaging used to transport the food.
       (2) "Prepared food" does not include:
       (A) Food that is only cut, repackaged or pasteurized by the seller; or
       (B) eggs, fish, meat, poultry or foods containing these raw animal foods that require
 cooking by the consumer as recommended by the food and drug administration in chapter 3,
 part 401.11 of the food and drug administration food code so as to prevent food borne
 illnesses.
       (ppp) (1) "Soft drinks" means nonalcoholic beverages that contain natural or artificial
 sweeteners.
       (2) "Soft drinks" does not include beverages that contain milk or milk products, soy,
 rice or similar milk substitutes or beverages that are greater than 50% vegetable or fruit
 juice by volume.

 In addition, New Section 1(b) provides the reduction in the state sales tax on food does not

apply to prepared food, except in certain specified cases. The subsection provides:

       (b) The provisions of this section shall not apply to prepared food unless sold without
 eating utensils provided by the seller and described below:
       (1) Food sold by a seller whose proper primary NAICS classification is manufacturing
 in sector 311, except subsector 3118 (bakeries);
       (2) (A) food sold in an unheated state by weight or volume as a single item; or
       (B) only meat or seafood sold in an unheated state by weight or volume as a single
 item;
       (3) bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries,
 donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies and tortillas; or

       (4) food sold that ordinarily requires additional cooking, as opposed to just reheating,
 by the consumer prior to consumption.

  Under current law, K.S.A. 79-32,271 provides an income tax credit for individual income

taxpayers who purchased food in Kansas, had federal adjusted gross income for the tax year that
did not exceed $30,615, and meets certain other qualifications. Amendments made by Section 4
of the Bill sunset this credit at the end of tax year 2024.

 For additional, and more specific information regarding application of the new law,

including examples of how it will apply to real life situations, please see the Department's
Publication KS-1223, Food Sales Tax Rate Reduction which is available through
our website at: www.ksrevenue.gov.

                                TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                             Taxpayer Assistance Center
                            Kansas Department of Revenue
                            Scott Office Building, 1st Floor
                                   120 SE 10th Ave
                                    P. O. Box 3506
                               Topeka, KS 66601-3506
                                 Phone: 785-368-8222
                                  Fax: 785-291-3614