Eating Establishments Guide
Eating Establishments Guide
The information describes the sales and use tax topics related to eating establishments. Use the links in the Guide Menu to see information about that topic.
Sales - Food
Sales - Food
Most food and drink sold by an eating establishment is taxable unless a specific exemption applies. This includes bars, restaurants, food trucks, and retailers or others who sell prepared food or drinks.
Prepared Food Sales
Any food prepared by the seller or sold with eating utensils provided by the seller is taxable. For more information, see Prepared Food.
Catering Sales
Catering services are taxable, including:
- Charges for delivery, preparation, or services
- Drinks
- Food
- Rentals of chairs, tables, tablecloths, and tableware
Personal Chef Services
Charges for a personal chef to prepare food, when the customer provides the food and food ingredients, is not taxable.
Gift Certificates and Gift Cards
Gift certificates and gift cards are not taxable when sold. When a gift certificate or gift card is redeemed, charge sales tax on any taxable portion of the purchase. Apply the amount of the gift certificate or card as a cash payment.
Sales - Beverages
Sales - Beverages
Liquor Sales
Sales of liquor, wine, and beer are taxable. You must have a liquor license to sell these drinks. The type of license and your location determine the tax rate you must charge on your liquor sales.
| If you have this type of license | You must charge all of the following |
|---|---|
| Intoxicating liquor, club, or wine |
|
| 3.2% Malt liquor |
|
| Set-up |
|
Note: No matter what type of liquor license you have, nonalcoholic beer and wine is only subject to the state general sales tax rate and any applicable local taxes.
Liquor for Resale
Eating establishments are retailers and cannot sell liquor to any person or business for resale. Only liquor distributors can legally sell for resale.
Cannabis Sales
Beverages containing cannabis or hemp-derived ingredients are taxable. See Cannabis Tax.
Taxable cannabis products are subject to:
- 10% Cannabis Tax
- 6.875% state general rate sales tax
- Any applicable local sales taxes based on where the transaction takes place
Past Due Taxes
If you owe the Department of Revenue past due taxes or have unfiled tax returns, we may stop your business licenses from being issued or renewed until your taxes are up-to-date. For more information, see Collection Information.
If you sell liquor, beer, or wine and are 10 or more days late in filing or paying your taxes, we will place you on the public Tax Delinquency (Liquor Posting) list. For more information, see Liquor Posting.
If you are subject to Cannabis Tax and are 10 or more days late in filing or paying your taxes, we will place you on the public Tax Delinquency (Cannabis Posting) list. For more information, see Cannabis Posting.
Payment Agreements
You cannot have a payment agreement unless you surrender your liquor license or if your business is subject to Cannabis Tax. For more information, contact us at 651-556-6830.
Sales - Tips and Other Charges
Sales - Tips and Other Charges
Tips, other service charges, or rental charges may be taxable.
Voluntary Tips
Tips that a customer voluntarily leaves or adds to a credit card receipt are not taxable.
Tips Added by Seller
Tips or service charges a seller adds to the bill are taxable, even if the tip amount is given to employees. The table below shows which taxes apply.
| Tips or Service Charges for These Items: | Are Subject to These Taxes: |
|---|---|
| Food only |
|
| Liquor only |
|
| Food and liquor combined (see note below) |
|
Note: If you can divide the tip or service charge to show what portion is for food versus liquor, do not collect the 2.5% liquor tax on the food portion. You must keep documentation showing how you determined the tax.
Other Charges
Other charges added to a customer’s bill are considered part of the sales price. If the item or service is taxable, the additional charges are taxable.
Examples include but are not limited to:
- Cover charges (for food, drinks, entertainment, dancing, admissions, etc.)
- Delivery charges
- Equipment rentals (decorations, tables, chairs, audiovisual equipment, etc.)
- Parking fees for customers or employees
- Noncash fees or fees to use a credit or debit card
- Dine in or take out fees
- Charges for employee fair wages, employee benefits, or employee wellness
- Surcharges (food, fuel, etc.)
For more information, see Sales Price.
The following charges are not taxable when separately stated:
- Coat check fees
- Corkage fees
- Returnable container fees (pie tin, or other reusable food or beverage container)
- Space rental (meeting room, ballrooms, halls that are not in a recreational area or for lodging)
Sales - Vending Machines and Amusement Devices
Sales - Vending Machines and Amusement Devices
Some sales through vending machines are taxable. All sales to use entertainment and amusement devices are taxable.
Vending Machines
The only taxable food sold through vending machines is prepared food, soft drinks, candy, and dietary supplements.
| Taxable Food in Vending Machines | Nontaxable Food in Vending Machines |
|---|---|
|
|
For more information, see:
Entertainment and Amusement Devices
The use of all entertainment and amusement devices is taxable. Examples include:
- Batting cages
- Cranes
- Foosball and pool tables
- Fortune telling machines
- Jukeboxes
- Photo or video booths
- Rides
- Video and pinball games
For more information, see Vending Machines and Other Coin-Operated Devices.
Determining Sales Price
Determining Sales Price
Different areas of a restaurant or bar may have sales tax included in the price or listed out as a separate item.
Sales Tax Included
If you include sales tax in the price, you must notify your customers in writing. You can do this by posting a sign or placing a statement on your menu that “all prices include sales tax.”
Sales in the Restaurant
When prepared food and drinks are sold in a restaurant, show the sales tax as a separate item on the total bill.
Drink Sales in Bar Area
When drinks are sold in the bar area of a restaurant, you may include sales tax in the price of the drink. This makes paying for drinks easier. You must notify customers that sales tax is included in the price.
When sales tax is included in the price of drinks in the bar area of a restaurant, you must track bar sales separately (on a separate register) from restaurant sales. Handle sales tax the same for all bar sales.
Local Sales Taxes
Some cities and counties have local sales and use taxes. If you are located in or make sales into an area with a local tax, you may owe local sales and use tax. For more information, see Local Sales and Use Taxes.
To determine the sales tax rate, use the location where the product is received by the customer, typically your business or a delivery address. You can use our Sales Tax Rate Map or Sales Tax Rate Calculator to help you determine the sales tax rate.
Note: The map and rate calculator do not include special local taxes.
For more information, see:
Discounts and Coupons
Discounts and Coupons
Discounts and coupons allow customers to buy prepared food and drinks at a reduced price.
Examples of discounts and coupons:
- Buy one, get one free meals
- 50% off the purchase of second entrée
- Free drink with a purchase of an entrée
- Free child meal with the purchase of an adult meal
What do I charge sales tax on?
The price you charge tax on depends on if you are reimbursed for the discount or coupon being redeemed.
| Are you reimbursed by a third party? | Charge sales tax on: |
|---|---|
| Yes | Total sales price before you subtract the discount amount |
| No | Sales price after you subtract the discount amount |
Online Discount Vouchers and Coupons
Generally, customers buy discount vouchers and group coupons online and then bring them to the retailer for the discount. The purchase of a discount voucher is not taxable. If the item (or service) is taxable, charge sales tax when the voucher or coupon is redeemed.
| Do you know how much the customer paid for the voucher? | Charge sales tax on: |
|---|---|
| Yes | Amount paid for the discount voucher |
| No | Face value of the discount voucher |
Note: Your records must support the tax calculation.
For more information, see Coupons, Discounts, Rewards, Rebates, and Other Forms of Payment.
Employee Meals
If employees receive a discount on meals, charge tax on the price an employee pays for a meal. For example: Your employees get a 15 percent meal discount. The menu price (before tax) is $10.00. The $8.50 discounted price is taxable.
If employees receive free meals, you owe use tax on the cost of any taxable items used in the meal. For more information, see Free Meals and Drinks.
Free Meals and Drinks
Free meals and drinks are given away with no purchase necessary, which does not include two for one meals, free child meals (with adult purchase), or coupon meals.
You must pay use tax on taxable items provided or included with a free drink or meal.
Examples include:
- Disposable cups
- Napkins
- Prepared food
- Soft drinks in cans or bottles
- Straws
If you serve free drinks, you must pay use tax on the cost of liquor used in the free drinks. Use tax includes the state general use tax rate, the liquor gross receipts use tax, and any applicable local taxes.
Note: Use tax is not due on the cost of nontaxable food.
Complimentary Hotel Meals
Meals and drinks are considered complimentary when they are included in the price of a room, and the room charge is the same whether or not the customer consumes the meal or drink.
Examples include:
- Appetizers
- Beverages (alcoholic and nonalcoholic)
- Continental or hot breakfast
- Cookies and snacks
- Evening dinner
Note: Tax is due on any taxable items used to provide complimentary meals or drinks.
Sales to Government and Nonprofits
Sales to Government and Nonprofits
Most sales of food and beverages to governments are taxable. However, there are some situations where sales tax is not due.
| Exemption Type | Food Sales Taxability |
|---|---|
| Federal Government |
|
| State and Local Governments |
|
| Tribal Governments |
|
| Nonprofit Organizations |
|
| Direct Pay Authorization |
|
Food at Schools
Food at Schools
The location of where the food is served determines if the sale is taxable or not.
| School Location Type | Food Sales Taxability |
|---|---|
| Pre-kindergarten – 12th grade schools | All food and drink served at pre-kindergarten through 12th grade schools is not taxable. This exemption also applies to non-school events (such as a wedding or party). |
| Concession stands | Concession stand sales on school premises are not taxable. |
| Administration offices | Prepared food and drink sales in administrative offices located off of the school premises are taxable. (The offices are not part of the school.) |
| Colleges, universities, and private career schools | Meals served to students at colleges, universities, and private career schools are taxable. For more information, see Schools – Sales and Purchases. |
| Vending machines | The only taxable food sold through a vending machine at a school is prepared food, soft drinks, candy, and dietary supplements. For more information, see Sales – Vending Machines and Amusement Devices. |
Taxable Purchases and Use Tax
Taxable Purchases and Use Tax
Items you use to operate your business are taxable unless a specific exemption applies. Several services are also taxable. If you do not pay sales tax on a taxable purchase, then you owe use tax. See the following table for examples.
| Taxable Purchases | Examples |
|---|---|
| General items |
|
| Cooking and serving equipment |
|
| Utilities |
|
| Taxable services | For more information, see a complete list of taxable services. |
Note: Eating establishments generally do not qualify for the industrial production and capital equipment exemptions.
Vehicles and Trailers
Licensed vehicles and trailers are subject to the Motor Vehicle Sales Tax (not the state general sales tax).
Installing equipment and utilities to convert a vehicle or trailer to serve food is taxable.
For more information, see Motor Vehicle.
Use Tax
If you buy equipment, supplies, or other taxable items for your business and the seller does not charge Minnesota sales tax, you owe use tax on the cost of the items. If your business is located in an area with a local tax, you may also owe local use tax.
Some common situations where you may owe use tax include:
- You buy taxable items or services online without paying sales tax
- You withdraw an item from inventory to use (instead of selling it), donate, or give away
- You buy taxable items outside of Minnesota
- You buy taxable items in another Minnesota city or county with a lower (or no) local sales tax
For more information, see Use Tax for Businesses and Local Sales and Use Taxes.
Nontaxable Purchases
Nontaxable Purchases
You may buy items exempt from sales tax if they will be sold as part of prepared food and drinks.
Give your supplier a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.
The following table lists some specific examples.
| Nontaxable Purchases | Examples |
|---|---|
| Items that are part of prepared food |
|
| Disposable serving pieces |
|
| Other supplies |
|
| Clothing for general use |
For more information, see Clothing. |
Lawful Gambling
Lawful Gambling
Registered nonprofit organizations may conduct lawful (charitable) gambling such as bingo, raffles, paddletickets, tipboards, and pull-tabs. Some food or bar establishments lease or grant space to these organizations.
These activities are subject to the state’s Lawful Gambling Tax, but not sales tax.
For more information:
- See Gambling Taxes
- Visit the Gambling Control Board website
- Call the Gambling Control Board at 651-539-1900
Gambling Device and Equipment Sales
Retail sales of tangible personal property used in conducting lawful gambling (under Minnesota Statutes, Chapter 349) or State Lottery (Chapter 349A) are subject to sales tax. A retail sale includes the sale, lease, or rental of tangible personal property. A retail sale does not include the sale of tangible personal property for the purpose of resale, sublease, or subrent.
The following are examples of taxable items when sold by a distributor or other entity to a lawful gambling organization.
| Gambling Devices and Equipment Type | Taxable Examples Include, But Are Not Limited To: |
|---|---|
| Gambling devices and equipment for non-electronic lawful gambling games |
|
| Gambling devices and equipment for electronic lawful gambling games (such as electronic pull-tabs or electronic bingo) |
|
Monthly Charges
Monthly gambling device or equipment charges are taxable when sold, leased, or rented to a lawful gambling organization by a distributor or other entity. The taxable sales price includes any monthly charges.
Revenue Sharing Agreements
When an agreement between the lawful gambling organization and a distributor or other entity (such as the distributor or manufacturer) includes revenue sharing, the revenue sharing agreement is taxable. The taxable sales price of the gambling devices and equipment includes any revenue the lawful gambling organization shares with other entities (such as the distributor, manufacturer, or both) under a revenue sharing agreement.
Local Sales Tax Rate
The tax rate the distributor or other entity must charge the lawful gambling organization depends on if the city where the sale takes place has a local gambling tax. See the chart below.
| Does the city have a local gambling tax where the sale takes place? | What tax rates apply? |
|---|---|
| Yes |
|
| No |
|
Sales Tax Resources
Statutes and Rules
- Minnesota Statutes 297A.61
- Subd. 4(a)(1)
- Subd. 4(i)
- Subd. 4(k)
- Subd. 4(l)
- Subd. 4(o)
- Subd. 7
- Subd. 10
- Subd. 17
- Subd. 54
- Minnesota Statutes 297A.70, subd 4(a)(1)
- Minnesota Statutes 349.213, subd. 3
- Minnesota Rule 8130.6200, subp. 8(A)
Revenue Notices
Fact Sheets
Legal References and Resources
Legal References and Resources
The legal references and resources related to eating establishments are listed.
Minnesota Statutes
- 157, Food, Beverage, and Lodging Establishments
- 297A.61 Definitions
- 297A.67 General Exemptions
- 340A. 101 Liquor Definitions
Revenue Notices
Fact Sheets
- Candy
- Capital Equipment
- Clothing
- Coupons, Discounts and Other Forms of Payment
- Detective and Security Services
- Dietary Supplements
- Food and Food Ingredients
- Hospital and Nursing Home Meals
- Industrial Production
- Isolated and Occasional Sales
- Lawn and Garden Maintenance, Tree and Shrub Services
- Minneapolis Special Local Taxes
- Prepared Food
- Schools – Sales and Purchases
- Soft Drinks and Other Beverages
- Special Local Taxes
- Tribal Governments and Members
- Use Tax for Businesses
Guides
- Admissions and Amusement Devices
- Building Cleaning and Maintenance
- Government – Federal Government
- Government – Local Governments
- Government – State Agencies
- Hotels and Other Lodging Establishments
- Local Sales and Use Tax
- Motor Vehicle
- Parking Service Providers
- Sales and Use Tax Business Guide
- Vending Machines and Other Coin-Operated Devices