In honor of National Doughnut Day (June 6), Kelly Phillips Erb at Forbes.com reminds us that doughnuts are one of those “quirky foods” that create confusion for taxpayers and retailers. Most sales tax jurisdictions tax foods that are designed to be consumed at the seller’s location, while many exempt foods that are meant to be taken away. But a few have nuanced rules that complicate the tax treatment of doughnuts.
As Erb points out, North Carolina specifically includes doughnuts in its exemption for “bakery items sold without eating utensils by an artisan bakery.” In Richmond, Virginia, sales tax on doughnuts depends on how many you order. New York, on the other hand, exempts doughnuts, unless they are heated, sold for consumption on the premises, or prepared by the seller and ready to consumed.
But what about Connecticut? According to this 2002 Department of Revenue Services Policy Statement, although “food” is generally exempt from sales tax, “meals” sold by eating establishments, including coffee and donut shops, are taxable. But special rules apply to certain food items, including doughnuts, purchased under the right circumstances. A sale of five or fewer doughnuts is considered a meal and is therefore taxable, while a sale of six or more doughnuts is a non-taxable bulk sale.
The rules are a bit more complicated if you purchase the doughnut in a supermarket. Doughnuts sold in any quantity are not taxable when sold in a supermarket, unless they are sold in an area of the store where food is intended to be consumed (i.e., a snack bar or food court). Doughnuts sold in these designated eating areas are taxable even if you take them out of the supermarket to eat them.
