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Is food taxable in California? Grocery and prepared-food sales
Food tax treatment depends on the product and how it is sold. Grocery items, hot prepared food, beverages and on-premises dining need distinct records so the sales report reflects the transaction.
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General information, not legal or tax advice.
Separate exempt food products from other merchandise
CDTFA generally exempts food for human consumption, with exceptions including on-premises consumption where eating facilities are provided. Its grocery examples include candy, gum, ice cream and noncarbonated sports drinks among nontaxable food products. Alcohol, carbonated beverages, dietary supplements, ice and pet food are listed as taxable items. Review product coding against the publication rather than treating the entire store as a single category.
Sources: CDTFA Publication 31, Grocery Stores (November 2024)
Read the hot-food rule with its to-go exceptions
Hot prepared food heated above room temperature is generally taxable whether eaten on-site or taken away. CDTFA excepts hot bakery goods, hot coffee and other hot beverages when sold individually to go. Keep the manner of sale visible in register coding so a standalone beverage and a prepared meal do not automatically receive the same treatment.
Sources: CDTFA Publication 31, Grocery Stores (November 2024)
Examine combinations sold for a single price
CDTFA treats a hot-and-cold combination sold for a single price as hot prepared food. Its examples include hot chicken with cold sides and a doughnut with coffee. For a cold to-go combination containing a carbonated beverage, only the soda portion is taxable. Preserve the product and price breakdown supporting the register configuration.
Sources: CDTFA Publication 31, Grocery Stores (November 2024)
Test both parts of the 80-80 rule
The rule applies when more than 80% of gross receipts come from food products and more than 80% of retail food-product sales are taxable. Alcoholic and carbonated beverages do not count as food products for this test. CDTFA evaluates the rule location by location and says to test it when starting or acquiring a food-service business or changing the product mix or service.
Sources: CDTFA Publication 22, Dining and Beverage Industry (January 2025)
Support separately accounted to-go sales
Under the 80-80 rule, CDTFA generally requires tax on to-go food and beverages unless nontaxable or the business elects to separately account for qualifying cold food, separately priced hot bakery goods and hot beverages. Guest checks and register tapes support that separation; inadequate documentation can make those sales taxable. Review the records with your CPA before relying on a register setting alone.
Sources: CDTFA Publication 22, Dining and Beverage Industry (January 2025)
Sources: separate exempt food products from other merchandise
Restaurant records and return preparation workflow
Reconcile food sales with the register detail
Tidwell helps organize sales categories, deposits and reporting records, working with your CPA on tax treatment and classification questions.