Figuring out how to handle sales tax for food items can be tricky. This is especially true for Ohio-based operations, which have a unique set of rules regarding sales tax on food.

Whether you’re running a grocery store, restaurant, or delivery service, knowing what’s taxable and what’s not can greatly impact your bottom line. Below, we’ll explain what Ohio businesses need to know about how food is taxed in their state.

What’s in this article?

• What is grocery tax?
  
• Are groceries taxable in Ohio?
  
• Are meals and beverages taxable in Ohio?
  
• How is food defined from a tax standpoint?
  
• List of taxable and non-taxable food items for restaurants in Ohio
  

What is grocery tax?

Grocery tax refers to the sales tax applied to food and beverages sold at grocery stores. This varies widely depending on the state and sometimes down to the specific locality. Some states exempt most or all groceries from sales tax, while others apply a lower rate to these purchases. What constitutes a “grocery item” can also vary by state and locality, with distinctions often made between food ingredients and prepared dishes.

Are groceries taxable in Ohio?

In Ohio, most grocery items are not taxable. This exemption covers basic food staples such as fruits, vegetables, meat, dairy, and unsweetened bottled water at everyday markets. The following categories found in grocery stores are exceptions to this rule and are subject to the state’s 5.75% sales tax plus local surcharges:

• Soft drinks: Sweetened water and tea, soda, energy drinks, and sports drinks are subject to sales tax.

• Dietary supplements: Vitamins, minerals, protein powders, and other dietary supplements are subject to sales tax.

• Pet food: Pet food is taxable in Ohio.

Are meals and beverages taxable in Ohio?

The taxability of meals and beverages in Ohio depends primarily on where they are consumed and if they are considered “food” for tax reasons. Here’s a breakdown of how meals and beverages are assessed:

Meals

• Food consumed on premises: If you dine in at a restaurant, café, or any establishment where you consume the food on the property, the meal is taxable. This includes the food and beverages, condiments, or other items in the dish. Catered meals are also generally taxable when consumed on the premises where they are served.

• Food consumed off premises: Meals taken out or delivered for consumption elsewhere are exempt from sales tax. This applies to drive-through orders, restaurant takeaway, delivery, and catered meals consumed off premises.

Beverages

• Soft drinks: Sweetened beverages, energy drinks, and sports drinks are always taxable, whether consumed on- or off-site.

• Unsweetened beverages: Plain coffee, tea, unsweetened bottled water, and milk are exempt from sales tax unless consumed on the property where they are sold. However, adding sweeteners or flavourings to these beverages can make them taxable.

• Alcohol: Alcohol is always taxable, no matter if consumed on- or off-site. It’s subject to a separate excise tax in addition to sales tax.

How is food defined from a tax standpoint?

In Ohio, the tax definition of food is quite specific. According to the Ohio Revised Code Section 5739.01, food is “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.”

This definition explicitly excludes the following categories:

• Alcoholic beverages

• Dietary supplements

• Soft drinks (defined as non-alcoholic beverages containing natural or artificial sweeteners)

• Tobacco

This definition focuses on the item’s intended purpose and consumption. For instance, while technically edible, baking soda is also sold for other uses. When packaged and sold for different purposes, these items would not be considered “food” for tax reasons.

List of taxable and non-taxable food items for restaurants in Ohio

Here’s a list of taxable and non-taxable food items for dining establishments in Ohio. While food and beverages might be exempt from sales tax in certain situations, service charges, delivery fees, and gratuity are typically taxable.

Taxable food items

• Meals consumed on premises: Any food or beverage served and consumed within the restaurant, including appetizers, entrées, desserts, coffee, tea, and alcoholic beverages

• Soft drinks: Sweetened iced teas, energy drinks, and sports drinks

• Dietary supplements: Vitamins, minerals, protein powders, and other supplements sold by the restaurant

• Alcoholic beverages: Beer, wine, liquor, and mixed drinks

Non-taxable food items

• Meals consumed off premises: Food that is ordered to go, for delivery, or through a drive-through is exempt from sales tax

• Whole, unprepared foods: Raw fruits, vegetables, meat, poultry, and fish sold uncooked and not combined with different ingredients

• Bakery items intended for home baking: Loaves of bread, rolls, and other items meant for home baking are usually exempt

• Unsweetened beverages: Plain coffee, tea, unsweetened bottled water, and milk are exempt if consumed off premises

• Ice: Ice sold by the restaurant for off premises consumption is typically exempt