Do inmates have to pay Texas sales tax on food, candy, and soft drinks bought at a jail or prison commissary?

Plain-English summary

The Texas Comptroller's Tax Policy Division responded to a commissary operator at a jail, prison, or correctional facility asking about the taxability of food products, meals, soft drinks, and candy sold to inmates. The commissary works like a convenience store: during certain hours, inmates can buy items there, but the facility's dining room is closed at those times and has no tables, trays, chairs, benches, or booths available, so inmates take their purchases back to their rooms or elsewhere to consume them.

The Comptroller explained that, effective October 1, 1995, sales tax became due on food ready for immediate consumption, soft drinks, and candy sold to inmates of correctional facilities operated by or under contract with the State of Texas or a political subdivision (a city or county). This change eliminated the prior exemption that had let an inmate buy meals, soft drinks, and candy tax-free even though a prison employee or visitor had to pay sales tax on those same items.

Because this particular commissary has no eating facilities, the letter walks through an 18-item list of specific products and states whether each is taxable or nontaxable under that standard — for example, chips, cookies/crackers, fresh fruit, dried fruit, canned tuna and sardines, honey, sugar cubes, spices, soy/picante sauces, and peanut butter in a jar are nontaxable, while powdered juice mixes and peanut butter bars (taxed as candy) are taxable, and items like coffee/cocoa/tea mixes, vienna sausages/summer sausages, and tortillas are nontaxable unless heated by the retailer or served with utensils. The Comptroller noted that Rule 3.293 was going to be revised to reflect the October 1, 1995 change, but enclosed the existing rule for its background discussion of "food ready for immediate consumption."

What this means for you

Correctional-facility commissary operators

If you run a commissary at a jail, prison, or correctional facility operated by or under contract with the State of Texas or a political subdivision, sales tax applies to food ready for immediate consumption, soft drinks, and candy sold to inmates, the same as it would to anyone else. The old exemption that let inmates buy these items tax-free no longer applies as of October 1, 1995.

Businesses selling packaged food items with no eating facilities

The item-by-item list in this letter illustrates the Comptroller's general approach to "food ready for immediate consumption": items like chips, crackers, canned goods, spices, and jarred peanut butter are treated as nontaxable groceries, while things typically classified as candy (like peanut butter bars) are taxable, and items that could be heated or served with utensils (like sausages or tortillas) become taxable only if actually heated by the seller or served with plates/utensils.

Accountants and tax professionals advising correctional or institutional food-service clients

This letter shows the Comptroller applying the general "food for immediate consumption" test from Rule 3.293 to the correctional-facility context, and confirms that the presence or absence of eating facilities (tables, trays, chairs, benches, booths) is central to whether otherwise-nontaxable food becomes taxable.

Common questions

Q: Do inmates have to pay sales tax on commissary food purchases?
A: Yes, as of October 1, 1995, according to this letter. Sales tax is due on food ready for immediate consumption, soft drinks, and candy sold to inmates of correctional facilities operated by or under contract with the State of Texas or a political subdivision.

Q: Did inmates used to be exempt from this tax?
A: Yes. The letter states this change "basically eliminates the exemption that allowed an inmate to purchase meals, soft drinks and candy tax free while a prison employee or visitor had to pay sales tax on the same meals, soft drinks and candy."

Q: Are chips, cookies, and canned goods sold at a commissary taxable?
A: Under this letter's item list, for a commissary with no eating facilities, chips, cookies/crackers, fresh fruit, dried fruit, canned tuna, sardines, honey, sugar cubes, spices, soy/picante sauces, and jarred peanut butter are nontaxable.

Q: Are candy and juice mixes taxable at a commissary?
A: Yes. The letter lists powdered juice mixes and peanut butter bars (taxed as candy) as taxable.

Q: Are heated or utensil-served items always taxable?
A: According to the letter, items like coffee/cocoa/tea mixes, vienna sausages and summer sausages, and tortillas are nontaxable unless the retailer heats them or provides eating utensils (plates, knives, forks, spoons) with them.

Q: Can another commissary or facility rely on this letter?
A: No. The letter states its opinion is based on the facts submitted, and other facts, though similar, may yield different results; STAR letters generally may be relied on only by the taxpayer to whom they were issued.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.293 (referenced in the letter for its discussion of "food ready for immediate consumption," subsection (a)(9); the rule was to be revised to reflect the October 1, 1995 change described in this 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/9510538L

Original ruling text

October 4, 1995

Dear *****:

Thank you for your letter concerning the taxability of food products, meals,
soft drinks, and candy sold to inmates at the *****.

Your commissary is similar to a convenience store, whereby inmates during
certain hours are permitted to purchase certain items from the commissary.
Although one location of the commissary opens up into the dining room, one
should note that the dining room is closed during commissary hours. So it is
not accessible to them to sit down at the time of purchase and eat any food
products using such dining room facilities. The inmates take the food products
back to their rooms or to another location away from the commissary where the
items were purchased.

Effective October 1, 1995, sales tax is due on food ready for immediate
consumption, soft drinks, and candy sold to inmates of correctional facilities
operated under the authority or jurisdiction of or under contract with the
State of Texas or a political subdivision of the state(i.e., City or County).
This basically eliminates the exemption that allowed an inmate to purchase
meals, soft drinks and candy tax free while a prison employee or visitor had to
pay sales tax on the same meals, soft drinks and candy.

You need to know the taxability of the following items sold from the
***** commissary with no available eating facilities (i.e., tables,
trays, chairs, benches, or booths):

1) Chips (Fritos, potato chips, etc.) Nontaxable

2) Cookies/crackers Nontaxable

3) Fruit (fresh) Nontaxable

4) Coffee/cocoa/tea mixes Nontaxable unless sold as a drink (hot coffee, etc.).

5) Juice mixes (powdered) Taxable

6) Health food drinks, bars, etc. Taxable unless a meal replacement.

7) Dried fruits Nontaxable

8) Vienna sausages, beef summer sausages, etc. Nontaxable unless heated by
retailer or sold with eating utensils provided (plates, knives, forks, spoons).

9) Cheese spreads Nontaxable

10) Oatmeal sandwich Sandwiches are taxable unless frozen, but this may be a
nontaxable cookie rather than a sandwich.

11) Honey(jar) Nontaxable

12) Cans of tuna. Nontaxable

13) Sugar cubes Nontaxable

14) Sardines (cans) Nontaxable

15) Spices Nontaxable

16) Peanut butter (jars and bars) Nontaxable if peanut butter in a jar. Peanut
butter bars are taxable as candy.

17) Soy sauces, picante sauces, etc. Nontaxable

18) Tortillas Nontaxable unless heated by retailer or served with eating
utensils provided (plates, knives, forks, spoons).

We are going to revise Rule 3.293 to include the change effective October 1,
1995. However, we have enclosed Rule 3.293 because it has useful information
on "food ready for immediate consumption" in subsection (a)(9).

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division