Local Food and Beverage Tax Rate Increase and Changes In Items Subject To Tax

Local Food & Beverage Tax Rate Increase

Effective July 1, 2010, the 0.25% local food and beverage tax will be increased to 0.5%. This increase is a result of the Wisconsin Center District exercising its authority to increase the rate, as provided in sec. 77.981, Wis. Stats., (2007-08), as amended effective October 1, 2009 by 2009 Wis. Act 2.

Change in Items Subject to Local Food and Beverage Tax

Effective October 1, 2009, the local food and beverage tax applies to sales of candy,* soft drinks,* and prepared food* that take place in Milwaukee County.

Prior to October 1, 2009, the local food and beverage tax applied to the following sales that took place in Milwaukee County:

  1. The sale of meals, food, food products, and beverages sold for direct consumption on the seller's premises, and
  2. The sale of the following items for off-premises consumption (including sales from vending machines):
    1. Meals and sandwiches, whether heated or not;
    2. Heated food or heated beverages;
    3. Soda fountain items such as sundaes, milk shakes, malts, ice cream cones, and sodas; and
    4. Candy, chewing gum, lozenges, popcorn, and confections.

*The definitions of "candy," "soft drink," and "prepared food" are provided in sec. Tax 11.51(3)(a), (3)(d), and (4), Wis. Adm. Code, as amended by EmR0924, respectively. Please see pages 103 -107 of this Emergency Rule, which is available at Documents/ch11emerrule.pdf. When the emergency rule becomes a permanent rule, the rule, in its entirety, will be available from the Wisconsin State Legislature's website at http://www.legis.wi.gov/.

The following examples illustrate some of the changes that were effective on October 1, 2009 (this list is not all-inclusive). For purposes of the following examples, the retailers' sales of "prepared foods" at the establishment are not greater than 75% of its total sales of all food and food ingredients at the establishment and, unless indicated, the retailer does not physically give or hand utensils to its customers.

  • Prior to October 1, 2009, sales of soft drinks sold in cans or bottles for off-premises consumption were not subject to the local food and beverage tax. Effective October 1, 2009, sales of soft drinks are subject to the local food and beverage tax, regardless of whether the soft drinks are sold from a dispenser, or sold in cans or bottles, and regardless of whether sold for consumption on or off the seller's premises.

    Example: Grocery Store A in Milwaukee County sells individual cans and bottles of soda, as well as six-packs, 12-packs, and cases of soda for off-premises consumption. Customers select the soda they wish to purchase from shelves of refrigerated display cases. Grocery Store A's sales of the soda are subject to the local food and beverage tax. (Prior to October 1, 2009, sales of soda from a dispenser were subject to the local food and beverage tax, but sales of soda in cans and bottles were not subject to the local food and beverage tax.)

  • Prior to October 1, 2009, sales of items such as ice cream bars, ice cream sandwiches, and popsicles were subject to the local food and beverage tax as candy or confections. Effective October 1, 2009, sales of items such as ice cream bars, ice cream sandwiches, and popsicles are not taxable, unless they meet the definition of "prepared food." The reason these types of items are not taxable is because the definition of "candy" excludes items that require refrigeration.

    Example 1: Grocery Store B in Milwaukee County sells ice cream cones, ice cream bars, and sundaes in its frozen food section. Sales of these items are not subject to the local food and beverage tax. (Prior to October 1, 2009, sales of frozen confections were subject to the local food and beverage tax.)

    Example 2: Ice Cream Shop C in Milwaukee County sells ice cream sundaes for $5.75 each. When the customer orders a sundae, Ice Cream Shop C scoops the ice cream into a dish, adds topping (e.g., hot fudge) and whipped cream, and provides the customer with a spoon. Ice Cream Shop C's sales of the sundaes are subject to the local food and beverage tax, since the sundaes that Ice Cream Shop C is selling meet the definition of "prepared food" (i.e., each sundae consists of two or more items combined by the retailer for sale as a single item and the sundae is served with utensils). (Prior to October 1, 2009, the sales of the sundaes were also subject to the local food and beverage tax.)

  • Prior to October 1, 2009, sales of meals and sandwiches were subject to the local food and beverage tax. Effective October 1, 2009, sales of meals and sandwiches that are not prepared by the retailer are not taxable, unless they meet the definition of "prepared food" (for example, sold in a heated condition or sold with utensils).

    Example 1: Deli D in Milwaukee County sells sandwiches that it purchases from Wholesaler E. Sales of these sandwiches are not subject to the local food and beverage tax, unless Deli D sells the sandwiches in a heated condition or provides utensils, such as plates, knives, forks, spoons, glasses, cups, napkins, or straws, with the sandwiches (i.e., the sandwiches are only subject to the local food and beverage tax if they are "prepared food"). (Prior to October 1, 2009, sales of sandwiches were subject to the local food and beverage tax.)

    Example 2: Deli F in Milwaukee County makes and sells sandwiches for $5.00 each. Sales of the sandwiches that Deli F makes and sells are subject to the local food and beverage tax, since the sandwiches are "prepared foods." (Prior to October 1, 2009, sales of sandwiches were also subject to the local food and beverage tax.)

    Example 3: Deli F in Milwaukee County makes and sells unheated sandwiches for $5 per pound. Sales of the sandwiches that Deli F makes and sells are not subject to the local food and beverage tax, since the sandwiches are sold by volume or weight. Sales of unheated items that are sold by volume or weight are not "prepared foods." (Prior to October 1, 2009, sales of sandwiches were subject to the local food and beverage tax, regardless of whether sold by weight or volume or otherwise.)

  • Prior to October 1, 2009, food and beverages that were sold for consumption on the seller's premises were subject to the local food and beverage tax. Effective October 1, 2009, candy, soft drinks, and prepared foods are subject to the local food and beverage tax, without regard to whether such items are for consumption on or off the seller's premises.

    Example 1: Bakery G in Milwaukee County sells bakery items and coffee and has a seating area where its customers may eat. Bakery G's sells Customer H a cup of hot coffee and two donuts that are not sold heated, which Customer H consumes at the seating area. Bakery G's sale of the coffee is subject to the local food and beverage tax (i.e., the coffee is served in a heated condition and is a "prepared food"). Bakery G's sale of the donuts is not subject to the local food and beverage tax (i.e., the donuts are not "prepared food"). (Prior to October 1, 2009, the sale of both the coffee and donuts was subject to the local food and beverage tax, since the coffee and donuts were consumed on the seller's premises.)

Publication 410, Local Exposition Taxes, is currently being revised. Please continue to check the Department of Revenue's website for this revised publication: Publications.

February 11, 2010