The Illinois Department of Revenue has issued a letter ruling that clarifies which rate of tax should be used by a bakery that sells both food which has been prepared for immediate consumption and grocery-type items and also provides facilities for on-premises consumption. Bakery items prepared by the bakery can be taxed at the lower rate if the area for on-premises consumption is physically separated or otherwise distinguishable from the area where food not for immediate consumption is sold and the retailer has a separate means of recording and accounting for collection of receipts from sales of both high and low rate foods.
The Department generally defines “physically separated” as separated or divided by a tangible barrier. An eat-in-area that is partially isolated from the general sales area of a store by the arrangement of display cases, service counters, or stub walls would qualify as “physically separated.” The second factor, separate means of recording and accounting for collection, would include cash registers that separately identify high rate and low rate sales, separate cash registers, or any other method by which the tax on high and low rate sales are recorded at the time of collection. (Private Letter Ruling, ST 09-0011-PLR, Illinois Department of Revenue, December 7, 2009)