Which supplies and materials that a restaurant or cafe buys are exempt from Texas sales tax as resale items, and which ones are taxable?

Plain-English summary

A restaurant or cafe operator asked the Comptroller's office for guidance on which supplies and materials purchased by restaurants are taxable versus exempt. The response letter includes a marked list dividing common restaurant items into two categories, plus a reminder about the four-year statute of limitations on bad debt deductions.

Exempt items (no tax on purchase, resale certificate applies): Paper bags (if provided to customers), paper cups, paper straws, plastic straws, paper dinnerware, paper napkins, foam cups, plastic dinnerware (if not reusable), foilwrap (if provided to customers), plastic bags (if provided to customers), stirrers, paper plates, toothpicks, starlight mints, paper mats/doilies, foam containers, plastic bowls (if provided to customers), to-go ketchup, to-go sugar, to-go salt/pepper, CO2 (if used to make drinks), gas cylinders (the rental/purchase charge for cylinders filled with CO2 is not taxable), food, alcohol, and non-alcoholic beverages.

Taxable items: Vacuum cleaner bags, paper towels, toilet tissue, flatware, and to-go menus.

The general rule: All items of a non-reusable nature that are provided to customers as part of the food service may be purchased tax-free by issuing a resale certificate to the supplier, in lieu of paying tax at purchase. Items the restaurant uses to operate its own business — rather than items that pass through to the customer as part of the meal or food service — remain taxable purchases.

The letter also points readers to Rule 3.293 for more detail on items purchased by food service operators, and to Rule 3.302 on bad debts, noting a four-year statute of limitations applies to bad debt deductions.

What this means for you

Restaurant and cafe operators

When buying disposable items that you hand to customers as part of serving food — cups, straws, napkins, to-go containers, condiment packets, plates, and similar single-use items — you can give your supplier a resale certificate instead of paying sales tax on the purchase, because you're treated as reselling those items to your customer as part of the meal. But supplies you use to run your own business operations, like vacuum cleaner bags, paper towels, toilet tissue for restrooms, reusable flatware, and printed to-go menus, are taxable purchases — you owe tax on those regardless of a resale certificate.

Food service suppliers

If a restaurant customer presents a resale certificate for items like paper cups, napkins, straws, or disposable containers, that is consistent with Comptroller guidance treating those as resale items. Items like paper towels or toilet tissue used in restaurant operations (not passed to the customer) would not typically be covered.

Bookkeepers and accountants for restaurants

Note the distinction turns on whether an item is passed to the customer as part of the food service (exempt, resale) versus consumed internally by the business (taxable). Reusable dinnerware/flatware and menus are taxable because they aren't transferred to the customer along with the food.

Common questions

Q: Can a restaurant buy paper cups, straws, and napkins tax-free?
A: Yes — these are listed as exempt items that may be purchased using a resale certificate, since they are provided to customers as part of the food service.

Q: Is food and alcohol purchased by the restaurant taxable to the restaurant?
A: No — food, alcohol, and non-alcoholic beverages are listed as exempt items in this letter, consistent with being purchased for resale.

Q: Are paper towels and toilet tissue tax-exempt for a restaurant?
A: No — these are listed as taxable items, since they are used in the restaurant's own operations rather than provided to customers as part of the meal.

Q: Is reusable flatware taxable when a restaurant buys it?
A: Yes — flatware is listed as a taxable item, unlike non-reusable plastic dinnerware.

Q: What rule should a restaurant consult for more detail on taxable versus exempt purchases?
A: The letter refers readers to Rule 3.293 for additional information on items purchased by food service operators.

Q: Can this letter be relied on by any restaurant in Texas?
A: No. Texas STAR letters bind only the taxpayer to whom they were issued; other businesses should not treat this letter as guaranteed guidance for their own purchases and should consult Rule 3.293 or a tax professional.

Citations and references

• Rule 3.293 (referenced for additional information on items purchased by food service operators — not quoted in the letter)
• Rule 3.302 (referenced regarding bad debt deductions and the four-year statute of limitations — not quoted in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9207222L

Original ruling text

July 2, 1992

Dear *****:

Thank you for your recent letter asking about items purchased by restaurants.

On the next page, I have marked the list as you requested. Please refer to Rule
3.293 for additional information on items purchased by food service operators.

You also asked about bad debts. Please see Rule 3.302. As the rule points out,
there is a four year statute of limitations for bad debt deductions.

If you have any questions or need more information, you may call me toll free
at 1-800-252-5555, extension 3-4633. The regular number is 512/463-4633. You
may also write to the Tax Administration Division.

Sincerely,
Wanda Hutcheson
Tax Administration Division

ITEMS USED/PURCHASED BY RESTAURANTS

EXEMPT ITEMS

Paper bags (if provided to customers), paper cups, paper straws, plastic
straws, paper dinnerware, paper napkins, foam cups, plastic dinnerware (if not
reusable), foilwrap (if provided to customers), plastic bags (if provided to
customers), stirers, paper plates, toothpicks, starlight mints, paper
mats/doilies, foam containers, plastic bowls (if provided to customers), to-go
ketsup, to-go sugar, to-go salt/pepper, CO 2 (if used to make drinks), gas
cylinders (if these cylinders are purchased or rented filled with the CO 2, the
charge for the cylinders is not taxable), food, alcohol, non alcoholic
beverages.

TAXABLE ITEMS

Vacuum cleaner bags, paper towels, toilet tissue, flatware, to-go menus.

NOTE:
All items of a non-reusable nature that are provided to the customers as part
of the food service may be purchased by issuing a resale certificate to
suppliers in lieu of tax.