Oklahoma Amends Definitions of Food and Food Ingredients for Sales Tax Exemption

For purposes of Oklahoma’s sales tax exemption for food and food ingredients, the state has clarified the definition of “prepared food” and added definitions for “bottled water” and “food sold with eating utensils provided by the seller.”

“Bottled water” means water that is placed in a safety sealed container or package for human consumption. Bottled water is calorie-free and does not contain sweeteners or other additives except that it may contain: antimicrobial agents, fluoride, carbonation, vitamins, minerals, and electrolytes, oxygen, preservatives, and only those flavors, extracts, or essences derived from a spice or fruit.

“Food sold with eating utensils provided by the seller” means food sold by a seller who meets the following requirements:

  • For a seller with a prepared food sales percentage of greater than 75%, the seller makes eating utensils available to purchasers or, if a food item is bottled water, candy, or soft drinks, the seller gives or hands the eating utensils to purchasers or makes plates, bowls, glasses, or cups that are necessary for the purchaser to receive the food available to purchasers.
  • For a seller with a prepared food sales percentage of 75% or less, the seller’s business practice is to give or hand eating utensils to purchasers. Eating utensils necessary for the purchaser to receive the food, such as bowls and cups, need only be made available to purchasers.

The legislation states that food sold with eating utensils provided by the seller does not include food items that have a utensil placed in a package with the food items by a person other than the seller, and that other person’s North American Industry Classification System (NAICS) classification code is that of a manufacturer, subsector 311. If the packager has any other NAICS classification code, the seller is considered to have provided the eating utensil.

The definition of “prepared food” has been clarified to add that it shall not include food sold by a seller whose primary NAICS classification is manufacturing in Sector 311, except subsector 3118, food sold in an unheated state by weight or volume as a single item, and food sold that ordinarily requires additional cooking, not including just reheating, by the consumer prior to consumption.

Sales of food including groceries and prepared food in Oklahoma have generally been taxable. With the passage of House Bill No. 1955, Oklahoma will provide a zero rate for state sales tax on food and food ingredients effective August 2024. Food and food ingredients will include bottled water, candy, and soft drinks. Food and food ingredients will not include prepared food. The legislation provides very specific guidelines for sellers of food and food ingredients in Oklahoma. Affected sellers will want to review the updated legislation carefully to confirm that they are applying the correct sales tax treatment to their sales.

Note that the legislation does not name an actual effective date, but rather states that “This act shall become effective upon the same effective date as Enrolled House Bill No. 1955 of the 2nd Regular Session of the 59th Oklahoma Legislature as prescribed by Section 58 of Article V of the Oklahoma Constitution.” (S.B. 1283, Laws 2024)

Posted on May 14, 2024