Do Bakeries Charge Sales Tax in California?

California imposes sales tax on retailers for selling tangible personal property at retail. This tax applies to the retailer’s gross receipts from such sales. The statewide sales tax rate is 7.25%, though local district taxes can increase the combined rate, sometimes reaching over 10% depending on the specific location within the state.

Understanding Sales Tax on Food in California

Sales tax rules for food products in California are specific, with general exemptions for items sold for home consumption. Most grocery items, like fresh fruits, vegetables, bread, and dairy products, are exempt from sales tax. This exemption aims to reduce the tax burden on essential food items.

However, food products become taxable under certain conditions. Sales tax applies to hot prepared food products, regardless of whether they are consumed on the premises or taken to go. A food product is considered hot prepared if it is heated above room temperature, even if it cools before sale, as long as it was intended to be sold hot. Additionally, cold food items exempt when sold to-go become taxable if consumed on the seller’s premises. The “80/80 rule” can also impact taxability for establishments where more than 80% of gross receipts are from food sales and more than 80% of those food sales are taxable; in such cases, all food sales, including cold to-go items, become taxable unless separately accounted for.

Sales Tax Rules for Bakery Products

The general principles of food taxation apply directly to bakery products, creating distinctions between taxable and non-taxable sales. Baked goods sold for home consumption, such as a whole loaf of bread, an unheated cake, or a dozen cold cookies packaged in a box, are exempt from sales tax. This exemption aligns with the general rule for food products intended for consumption away from the seller’s premises.

Baked goods sold for immediate consumption on the premises are taxable. This includes items like a single slice of cake eaten at a table or a pastry consumed within the bakery’s seating area. If a bakery item is hot prepared, such as a warmed muffin or a hot croissant, it is taxable even if sold for takeout. An exception exists for hot bakery items and hot beverages sold individually and to go, which are exempt unless part of a combination meal. If a bakery item is sold as part of a “meal” or with a taxable beverage, like a carbonated drink, the entire combination package or meal becomes taxable.

Scenarios Affecting Bakery Sales Tax

Custom cakes and special orders are treated as food products for home consumption, making them exempt from sales tax, unless they are considered a “meal” or include taxable non-edible decorations that exceed 50% of the total retail value. If non-edible decorations are separately itemized, tax applies to that charge. Charges for cutting and serving a customer-furnished wedding cake, however, are taxable.

When a bakery offers bundled sales, such as a coffee and a pastry, the taxability depends on the components. If the combination includes a hot prepared food or a carbonated beverage, the entire bundle becomes taxable. For instance, if a cold pastry is sold with a hot coffee, the combination is taxable. If a package contains both food and non-food items, the non-food items are taxable if they constitute more than 10% of the retail value of the package, excluding the container, and the retailer has supporting records.

Catering services provided by bakeries involve taxable charges for the preparation and serving of food and beverages. Sales of bakery products to other businesses for resale, such as a coffee shop purchasing pastries from a bakery, are exempt from sales tax. To qualify for this exemption, the buyer must provide a valid resale certificate to the bakery at the time of purchase.

Bakery Sales Tax Collection and Remittance

Bakeries operating in California are responsible for collecting sales tax from their customers on all taxable sales. To collect sales tax, a bakery must first obtain a seller’s permit from the California Department of Tax and Fee Administration (CDTFA). This permit is required for both wholesale and retail operations.

Once collected, the sales tax must be remitted to the CDTFA according to a filing schedule. Accurate record-keeping of all sales, including both taxable and non-taxable transactions, is important for compliance and to support any deductions claimed. Even if a bakery has no taxable sales for a reporting period, a return must still be filed, showing gross sales and any non-taxable deductions.