As a mobile food vendor, one of your many responsibilities will be the correct payment of food truck sales tax. Even though the consumer is usually responsible for paying the tax, the vendor has the obligation to collect as the seller and submit it to the government.
Your suppliers do not (or shouldn’t) charge you sales tax on food used exclusively for resale so sales taxes will only be due when you eventually sell food to your food truck customers. Because most new food truck owners aren’t familiar with food truck sales tax, we thought we’d share some of the basics.
Food Truck Sales Tax Basics
A sales tax is charged on the sale of services including the sale of most food from a food truck. The sales tax is calculated by multiplying the sale price by the current state sales tax rate. Forty-five states, plus the District of Columbia impose a sales tax on retail sales of certain services which include food truck meals. Sales tax rates vary from state to state. Municipalities can also charge a sales tax that will be added to your purchase price on top of the state sales tax.
Sales Tax On Food For Resale
Purchasing food for a food truck that is used exclusively for resale is exempt from sales taxes at the time of purchase. This relates to trucks that offer chips or desserts that are sold from your truck but not made by you. Depending on your state, you may be required to present your supplier resale certificate to prove you will be purchasing the food for the sole purpose of resale.
Collecting Food Truck Sales Tax
When you sell food to your customers, you are responsible for collecting sales taxes. You do not pay taxes on the purchase of food because you will be collecting taxes on the final product that leaves your service window. It is your responsibility to correctly calculate the amount of sales taxes due by your customers. You must register your food truck with your state and make payments of sales taxes at least quarterly. If you do not make the required sales tax payments to your state, your food truck business is likely to be charged a hefty penalty based on the estimated unpaid taxes.
Sales Tax Rules of Thumb for Food Truck Vendors:
- Know your state tax laws. Many states have state and local sales tax rates. This means that the going sales tax rate can change depending on what city your sales come from.
- Never over collect. A common question we hear is, “in states with variable local taxes, can I just pick an average tax rate?” The simple answer is No! First, consumers don’t like this and second, collecting at a higher rate is huge mistake. If you find that you did over collect, you will need to remit that amount to the state as an over collection, or refund the overage to the consumer.
- Stay Up To Date. Once you’ve successfully registered for a license to collect and pay sales taxes, you’ll start getting correspondence from the state. It is a good idea to read through the notices that they send to you since they will alert you of any changes in your account, rate updates, etc.
We hope this article has helped you better understand food truck sales tax of the food you sell from your truck. To get a better understanding we always suggest speaking with an accountant familiar with the food service industry.