Minnesota Food and Beverage Tax Compliance

ARTICLE | May 16, 2025

Authored by Schlenner Wenner & Co

Navigating the intricate tax laws surrounding food and beverage sales can be a challenging task for restaurants and other businesses in the food industry. In Minnesota, taxability of food and beverages is especially complex, with tax obligations often fluctuating based on the type of food, how it is prepared, and the utensils provided by the seller. Thus, understanding these complexities is crucial for maintaining compliance and avoiding potential penalties.

In Minnesota, food and food ingredients are generally exempt from sales tax. However, exceptions abound. For instance, prepared food, soft drinks, candy, dietary supplements, and food sold through vending machines are considered taxable. Moreover, determining the taxability of combination packages or gift baskets can be particularly tricky, as special rules apply depending on the cost and sales price of the taxable items included.

Specifically, for food to be considered "prepared" and hence taxable, it must meet certain criteria. These include being sold in a heated state, having two or more ingredients mixed or combined by the seller, or being sold with eating utensils provided by the seller. Furthermore, items like bakery goods and food requiring cooking prior to consumption, even if prepared by the seller, are not considered prepared food unless sold with eating utensils provided by the seller.

Moreover, the taxability of beverages can depend on their fruit juice content, as one example. Drinks with 50% or less fruit juice are categorized as soft drinks and are taxable. In contrast, fruit juices with more than 50% juice are exempt from sales tax.

Given these intricacies, restaurants and other food businesses in Minnesota can greatly benefit from the guidance of professional accountants. These specialists can provide invaluable assistance in navigating the tax laws, ensuring accurate calculation and reporting of sales tax obligations, and maintaining compliance.

With the help of an accountant, businesses can confidently navigate these complexities, ensure compliance, and focus on what they do best: serving delicious food and beverages to their customers.  Contact any of our offices for more information on fodd an dfood eingredient taxability and compliance.  

Read more from the Minnesota Department of Revenue:  https://www.revenue.state.mn.us/guide/food-and-food-ingredients