Grocery stores and convenience stores not only sell food products, they also sell a wide variety of other items and services – some of them taxable, and others nontaxable. For example, flour, sugar, bread, milk, eggs, fruits, vegetables and similar groceries (food products) are not subject to Texas sales and use tax. Tax is due, however, on non-food items such as paper, pet, beauty and hygiene products; clothing; books; and certain edible items.
Bakery Items – Taxable and Nontaxable
Bakery items sold by a business that qualifies as a bakery are not taxable. A bakery is a retail location where more than 50 percent of sales consist of bakery items sold from a display case or counter and consumed off the premises.
Bakery items sold by a business that does not qualify as a bakery are taxable when sold with eating utensils (plates, knives, forks, spoons) or when heated.
Bakery items include
Baking Products – Nontaxable
Baking products are not taxable, including
Beer and Wine – Taxable
Beer and wine are taxable.
Beverages and Water – Taxable and Nontaxable
Soft drinks are taxable and include
Energy drinks, sports drinks and naturally or artificially sweetened electrolyte drinks are taxable as soft drinks, except when they
Nontaxable beverages are
Candy and Gum –Taxable
Candy and gum are taxable. These include
Coffee and Tea – Taxable and Nontaxable
Coffee and tea are taxable when they are
Nontaxable coffee and tea include
Food Products – Nontaxable
Food products are not taxable. Food products include flour, sugar, bread, milk, eggs, fruits, vegetables and similar groceries.
Nontaxable food products also include food that is
If a store has a microwave that the customer uses to reheat food, tax is not due. For example, if the store sells a frozen burrito, and the customer uses the store’s microwave to heat it, tax is not due.
Ice and dry ice – Taxable
Ice and dry ice are taxable.
Prepared food – Taxable
Prepared food is taxable. This includes
*Hot food is food sold after it is heated by the seller. Examples are pizza, fried or rotisserie chicken, burritos and soup. Hot food also includes frozen or cold food (including sandwiches) that is heated by the seller. For example, if a store employee heats a frozen burrito for the customer, tax is due.
**Eating utensils include trays, plates, knives, forks, spoons, glasses, cups, straws or chopsticks. Napkins, wax paper and foam or plastic clamshells are not eating utensils.
If a store, other than a bakery, gives the customer plates or other eating utensils with bakery items, or heats bakery items, the bakery items are taxable.
Snack Items – Taxable and Nontaxable
Snack items are taxable when sold in an individual-sized portion or from a vending machine. An individual-sized portion contains less than 2.5 ounces or is labeled as having not more than one serving. Snack items that are not individual-sized are not taxable, unless sold as a part of a meal.
Snack items include
Snack items are not taxable when sold in prepackaged units containing more than one individual-sized package, such as a box of six prepackaged, individual-sized bags of chips.
Drugs, Medicines and Dietary Supplements – Nontaxable
Over-the-counter drugs and medicines required by the Food and Drug Administration to be labeled with a Drug Facts panel are not taxable. For more information, see Publication 94-155, Sales Tax Exemptions for Healthcare Items.
Dietary supplements are not taxable. A dietary supplement is a product that is labeled with a “Supplement Facts” panel in accordance with regulations of the FDA. If a product is not labeled with a “Supplement Facts” panel, it is also considered a dietary supplement if it
Products containing cannabidiol (CBD) are not classified as dietary or nutritional supplements. CBD or products containing CBD are not eligible for the dietary and nutritional supplement exemption from sales and use tax. These products should not be labeled as supplements. This exclusion reflects FDA guidance.
Books, Comics and Magazines – Taxable
Books, comics and magazines are taxable.
Cigarettes, Cigars and Tobacco Products – Taxable
Sales tax is due on cigarettes, cigars and all other tobacco products. See the Tobacco Taxes and Fees webpage for more information.
Newspapers – Nontaxable
Nontaxable newspapers must
Prepaid Wireless Telecommunications Service Cards – Taxable
Sales of prepaid wireless telecommunications service cards and devices are subject to both sales tax and to the 2 percent 9-1-1 Prepaid Wireless Emergency Service Fee.
Telephone Calling Cards – Taxable
Telephone calling cards are taxable.
A cash discount is an offer to customers that reduces an item’s price. Tax is due on the final discounted price of a taxable item. For example, a store offers customers a 10 percent discount on all purchases paid with cash. If a customer buys a taxable item priced at $25, the discounted price is $22.50 after the 10 percent discount of $2.50 is deducted. Tax is due on the final discounted price of $22.50.
A coupon is a cash discount. The store must subtract the coupon’s value from the taxable item’s sales price and collect tax on the resulting price.
Gift Cards and Gift Certificates
The purchase of a gift card or gift certificate is not subject to tax. Redeeming or purchasing an item with a gift card or gift certificate is treated as a cash transaction. If the item purchased is taxable, sales tax is due on the full sales price including any amount paid with the gift card.
There are two main types of rebates: manufacturer rebates and retailer rebates.
A mail-in manufacturer rebate does not lower the price because a third-party manufacturer provides the rebate after the sale.
For example, a $250 toaster oven comes with a $50 manufacturer mail-in rebate offer. A customer buys it for $250 and mails in the required information to receive the manufacturer’s $50 rebate. The store must collect tax on the $250 toaster oven price.
An instant manufacturer rebate the store deducts at checkout is treated as a cash discount.
For example, if a $250 toaster oven has a $50 instant rebate, tax is due on the final price of $200.
A mail-in retailer rebate issued by the retailer reduces the taxable sales price of the item when the rebate is processed and the refund is issued. In this case, the customer must pay tax on the item’s original price. When the store processes the rebate request, the store must give the customer the rebate and refund the tax collected on the rebate amount.
For example, a customer buys a television for $250 with a $25 mail-in retailer rebate. The tax is based on the $250 price. When the store rebates the $25, the store must also refund the tax paid on the $25 rebate amount.
Taxable items purchased in a grocery or convenience store are exempt when legally purchased with Supplemental Nutrition Assistance Program (SNAP) benefits. For more information about SNAP benefits, contact Texas Health and Human Services.
* Unless required by the FDA to be labeled with a Drug Facts panel or sold to a customer with a prescription
**Unless sold to a customer with a prescription
Bakery Items – (nontaxable when sold at a grocery and convenience stores without eating utensils or heated)
Condiments and Spices
Eggs and Egg Substitutes
Grains and Pasta
Meat, Poultry and Fish
Nutritional Supplements (product must meet the definition of a dietary supplement)
Over-the-Counter Drugs and Medicines (when required by the FDA to be labeled with a Drug Facts panel)
Snacks (unless sold in an individual-sized portion)
Wound Care Items
In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.