Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 1
Overview
Retail sales of prepared food, including sales by caterers, concessionaires, and all sales of
food and food ingredients through vending machines, are taxable.
Retail sales of alcoholic beverages are taxable.
6-432-2005 Rev. 6-2023 Supersedes 6-432-2005 Rev. 6-2018
Nebraska Sales and Use Tax Guide for
Prepared Food and Beverage Service
This guidance document is advisory in nature but is binding on the Nebraska Department of
Revenue (DOR) until amended. A guidance document does not include internal procedural
documents that only affect the internal operations of DOR and does not impose additional
requirements or penalties on regulated parties or include condential information or rules
and regulations made in accordance with the Administrative Procedure Act. If you believe
that this guidance document imposes additional requirements or penalties on regulated
parties, you may request a review of the document.
This guidance document may change with updated information or added examples.
DOR recommends you do not print this document. Instead, sign up for the
subscription service at revenue.nebraska.gov to get updates on your topics of interest.
Terms
Alcoholic Beverages. Alcoholic beverages means beverages that are suitable for human consumption
and contain 0.5% or more of alcohol by volume.
Beverage Service. The provision of alcoholic and nonalcoholic drinks by an establishment or business
such as a restaurant, cafe, hotel, or caterer.
Caterer. Caterer means an individual or business providing food and/or beverage service to customers.
Food or Food Ingredients. Food or food ingredients means substances, whether in liquid, concentrated,
solid, frozen, dried, or dehydrated form that are sold for ingestion or chewing by humans, and are
consumed for their taste or nutritional value (see Reg-1-087, Food for Human Consumption).
Prepared Food. Prepared food is food intended for, and which is generally ready for, immediate
consumption, either on or off the premises of the seller. Prepared food means food that meets any of the
following conditions:
A. The food is sold with eating utensils when the utensils are handed to the customer by the
seller. Examples include plates, bowls, knives, forks, spoons, chopsticks, skewers, platters or
trays designed for serving and displaying food, glasses, cups, napkins, or straws. If the eating
utensils are not handed to the customer by the seller, and are merely made available to the
customer, the food may or may not be taxable as prepared food. See the explanation on page
4;
B. The food contains two or more food ingredients mixed or combined by the seller for sale as a
single item. The combining or mixing may occur at premises other than the location where the
sale is made. Examples include meals, sandwiches, self-service fountain drinks, and ice cream
sundaes; or
Information Guide
June 2023
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 2
C. The food is sold in a heated state or heated by the seller. Note: Food that was heated by the
seller at any time before the sale, is taxable as prepared food even if it is in an unheated state
at the time of the sale. Heated state includes: baking, braising, boiling, broiling, dehydrating,
frying, microwaving, roasting, simmering, smoking, steam, or other forms of warming or
cooking. Examples include hamburgers, rotisserie chicken, baked beans, soups, and coffee.
Prepared food in Category B above does not include:
v Food that is only sliced, repackaged, or pasteurized by the seller (other than caterers). Examples
include luncheon meats, cheeses, meat and cheese trays, and cut fruits;
v Raweggs,sh,meat,poultry,andfoodscontainingtheserawanimalfoodsrequiringcookingby
the consumer as recommended by the FDA. One example is marinated meats;
v Food sold in an unheated state by weight or volume as a single item. Examples include containers
of deli salad and bagged popcorn;
v Food sold by food manufacturers. Examples include cereals, canned vegetables, and dairy
products;
v Bakery items. Examples include bagels, bread, biscuits, buns, donuts, cakes, cookies, croissants,
danish,muns,pastries,rolls,tarts,tortes,pies,tortillas,andothersimilaritems(alsoseeOther
Information below); and
vFoodthatordinarilyrequiresadditionalcookingtonishtheproducttoitsdesirednalcondition.
Taxable Sales
Establishments determined to be engaged in the sale of taxable prepared food are required to collect and
remit sales tax on the total amount charged for the food, with exceptions only for the sales listed in the
“Tax Exempt Sales” section, below.
Separate Statement of Tax
Except as noted below for sales by concessionaires, vending machines, and certain sales of alcoholic
beverages, retailers of prepared food must collect sales tax as a separate item from the selling price of
the food. In the following example, the restaurant is located in a city where the combined state and city
sales rate is 7.0%.
Example 1. Sandwich $6.00
Fountain drink +2.50
Subtotal $8.50
Sales tax (7% x $8.50) +.60
Total $9.10
Alcoholic Beverages
Sales of alcoholic beverages are taxable, whether sold packaged as “off-sale” or by-the-drink as “on-
sale.” Bars, taverns, and restaurants that hold a liquor license are permitted to include the sales tax in the
selling price of beverages that are consumed on their premises. Retailers and organizations which have
been granted a Special Designated License for the sale of alcoholic liquor may also include the sales tax
in the selling price of beverages consumed on property owned by governmental entities. Sales of soft
drinks from these establishments may be treated in the same manner (see Reg-1-040, Alcoholic Liquors
Consumed on the Premises).
For alcoholic beverages provided free-of-charge, the seller owes use tax on the cost of the beverages.
Caterers
Individuals or businesses providing catered foods or beverage service must collect sales tax on the gross
receipts from preparing or serving these foods and beverages. Charges for food, wages, bartenders, wait
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 3
staff, chefs, use of dishes, room service, chairs, tables, etc., are taxable even though separately stated
on the billing invoice. The tax applies whether the food is served by the seller or merely provided to the
purchaser for consumption. Sales tax does not apply to separately stated charges for announcers, door
attendants, or other persons not connected with preparing or serving of prepared food or beverages. The
location of the catered event determines the applicable local (city or county) sales tax that applies to
thesale.
Concessionaires
Concession sales are sales of food, prepared food, or alcoholic beverages made during the conduct of
an event or recreational activity. All concession sales of prepared food are taxable, except those made by
elementary and secondary schools. Concessionaires are permitted to include the sales tax in the selling
price.
In the following example, the concession stand is located outside the city limits where only the state sales
tax applies.
Example 2. Hamburger $5
Fountain drink 2
Ice cream cone +1
Total $8
In this example, sales tax is included in the $8 selling price of the prepared food items. When
calculating the amount of tax to be remitted on the retailer’s Nebraska and Local Sales and Use Tax
Return, Form 10, the sales receipts and tax amounts are calculated below.
Total sale including sales tax divided by one plus the tax rate. $8.00/1.055 = $7.58.
Sales receipts $7.58
Sales tax ($8.00 - $7.58) +.42
Total $8.00
Convenience Stores
Convenience stores often sell both prepared food, which is taxable, and food and food ingredients, which are
not taxable.
v Prepared Food. All food sold by convenience stores in a heated state is taxable and includes
items such as hot dogs, hot coffee, pizza, and pretzels. Food that is heatedbythepurchaser
is not taxable even if a microwave oven located on the seller’s premises is used. Sales of
fountain drinks and other mixed beverages, such as iced coffee drinks, are taxable.
Sales of food maintained at room temperature or cooler arenottaxable,unless the seller
physically gives the customer an eating utensil with the food (see “Eating Utensils Test”
below). For example, sales of sandwiches, donuts, or cookies which are not packaged by the
seller are not taxable, unless the seller’s customary practice is to give a napkin, plate, or other
eating utensil to the purchaser.
v Food and Food Ingredients. Sales of food and food ingredients, whicharenotclassiedas
prepared food, are not taxable. Food and food ingredients include staple foods (for example, milk,
our,eggs,meats,vegetableoils,gelatins,salt,ketchup,potatochips,candy,chewinggum,and
soft drinks in bottles or cans) (see Nebraska Sales and Use Tax Guide for Food, Food Ingredients,
and Dietary Supplements).
Delicatessens
All heated foods sold by a delicatessen (for example, pizza, meat loaf, fried chicken, rice, macaroni
& cheese, egg rolls, baked beans, soup, hot coffee, and potatoes and gravy), are prepared food and
aretaxable.
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 4
Sandwiches, whether packaged or unpackaged, thatarepreparedbytheseller, fountain drinks, or soft
serve ice cream are also taxable as prepared food.
Delicatessen foods maintained at room temperature or below (for example, potato salad, cole slaw, fruit
salad, olives, and pudding) are not taxable when served in a container with a lid and measured and sold by
weight or volume. These foods are taxable when sold as part of a meal, when catered, or when served on
a plate or with a fork, spoon, or other eating utensils.
Eating Utensils Provided by Seller
As explained above, when the seller hands the customer an eating utensil, such as a plate, cup, fork, or
napkin, the food is deemed to be sold “with eating utensils provided by the seller” and is subject to tax.
Eating Utensils Test
When eating utensils are not handed to the customer by the seller, and are merely made available for use
by customers, such as placing napkins or straws on a nearby counter, the seller’s sales of food may be
subject to tax as explained below.
To determine whether food is “sold with eating utensils provided by the seller,” and is therefore, taxable,
the seller must annually compute a percentage of its food sales as described in the following section.
If 75% or less of the sales of all food by the seller are sales as described in B and C of the “Prepared Food”
denitionabove,(twoormoreingredientsorheatedfood),theneatingutensilsareconsideredprovidedby
the seller for all other food items only if they are handed to the purchaser by the seller.
If more than 75% of the seller’s sales of all food items are sales of food described in B and C of the
“PreparedFood”denition,theneatingutensilsareconsideredprovidedbythesellerforallotherfood
items if they are merely available on the premises where the food is sold.
To calculate the percentage:
ThenumeratorincludessalesoffoodincategoriesBandCofthepreparedfooddenition.The
denominator consists of all sales of food and food ingredients, including all candy, soft drinks, and
dietary supplements. Alcoholicbeveragesareexcludedfromboththenumeratoranddenominator.
Example 3. A coffee shop makes sales of hot and iced coffee drinks, hot and iced tea, sandwiches,
bottled water, and dessert items (other food items). Napkins and straws are not handed to the
customer but are available on the counter. For 2022, the shop has computed its annual sales
percentage below.
Hot or iced coffee drinks $18,000
Hot or iced tea drinks 5,000
Sandwiches +3,000
PreparedFoodSubtotal $26,000
Cookies & brownies 2,000
Bottled water +2,000
Subtotal $4,000
TotalSales $30,000
Numerator $26,000
Denominator $30,000
Since the coffee shop’s sales of food consisting of two or more ingredients mixed or combined by the
seller (Category B) and food sold in a heated state (Category C) is 87% of the shop’s total sales, sales
tax must also be collected on sales of the dessert items and bottled water because these items are
considered to be sold with eating utensils provided by the seller (Category A).
Example4.A convenience store sells heated pizza, fountain drinks, a variety of bottled sodas,
and other food items, including cookies and brownies. Napkins and straws are not handed to
the customer but are available on the counter. For 2022, the store has computed its annual sales
percentage below.
= 87%
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 5
Pizza $10,000
Fountain drinks +10,000
Subtotal $20,000
Bottled soda 30,000
Other food items +200,000
Subtotal $230,000
TotalFoodSales $250,000
Numerator $20,000
Denominator $250,000
Since the convenience store’s sales of food consisting of two or more ingredients mixed or
combined by the seller (Category B) and food sold in a heated state (Category C) is only 8% of the
store’s total sales of all food items, the bottled soda and other food items are not taxable. The
bottled soda and other food items are not considered to be sold with eating utensils.
Exceptiontothe75%rule-For sellers with a sales percentage greater than 75% who sell food items that
contain four or more servings packaged as one item, the food item does not become prepared food, and
is therefore tax exempt, even though the seller has eating utensils available. For example, a restaurant
selling a dozen donuts, a loaf of bread, or a whole pie, would not be required to collect tax on these items.
Whenever available, serving sizes will be determined based on the “Nutrition Facts” label. If no label is
available, a seller will reasonably determine the number of servings in an item.
Vending Machine Sales
All food and other items sold through a vending machine are subject to tax. The location of the machine
determines the applicable local (city or county) sales tax that applies to the sales. Vending machine operators
will include state and local sales tax in the selling price of the items sold from the machine. The sales tax does
not have to be separately stated on vending machine sales (see Reg-1-031, Coin-Operated Machines).
Tax Exempt Sales
Sales and use taxes do not apply to the following sales:
v Certain sales of prepared food served or sold by schools, school groups, and churches, and
sales of prepared food served to patients and inmates of hospitals and other institutions
licensed by the State for the care of human beings. However, hospitals and schools that
operate cafeterias that are open to employees and the general public must collect and remit
sales tax on sales made to its employees and the general public. See Reg-1-083, Prepared
Food and Beverage Service; Reg-1-090,NonprotOrganizations; Reg-1-091, Religious
Organizations; and Reg-1-092, Educational Institutions;
v Prepared food sold by residential facilities with communal dining rooms. For example, sales
of meals to residents of a fraternity are not taxable. However, if a caterer sells meals to a
fraternity, this is taxable and tax must be collected from the fraternity;
v Prepared food sold by organizations for the elderly, handicapped, or recipients of Supplemental
SecurityIncomeauthorizedtoacceptelectronicbenetstransferorfoodcoupons.An
organization can be a charitable, educational, or civic organization. This would include an
organization operating a “Meals on Wheels” program. The term organization would also
includearetailer.TheorganizationmustacceptSNAPbenetsinorderfortheprepared
food to qualify as exempt. An organization would not include a sole proprietor unless it is
alsoalimitedliabilitycompanyorapartnershipbetweenspousesoperatingasaqualied
joint venture. An individual would be considered elderly if the person is 60 years or older for
purposes of the exemption. An individual would be considered handicap if they qualify for a
handicap placard from the registry of motor vehicles; and
v Concession sales of prepared food when sold by elementary and secondary schools at
schoolevents.
= 8%
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 6
Other Information
Bakeries
Items prepared and sold by a bakery, such as donuts, cakes, pies, and breads are not subject to sales tax
as long as the items are not sold in a heated state and are not served with an eating utensil. See Eating
Utensils test above.
Discounts and Coupons
StoreCoupons. When a customer uses a coupon or a frequent-buyer card for a discount or a free product
(for example, “buy one, get one free”) and a third party is not reimbursing the seller for the discounted
amount, sales tax is due on the amount actually paid by the customer. In other words, the discount or
coupon amount is sales tax exempt (see Reg-1-037, TradingStamps,Coupons,Certicates,Vouchers,
Reimbursed Price Reductions, and Group Discounts).
Example5. ABC Restaurant, located where the combined state and local sales tax rate is 7%,
advertises a 30% discount on the purchase of any regularly-priced menu item during the month
of April. To claim the discount, customers must present a store coupon that was printed in local
newspapers. A customer purchases a meal and presents the store coupon. Sales tax is calculated
as follows:
Selling price of the meal $30.00 T
Less store coupon amount -9.00
(30%x$30)
Amount subject to tax 21.00
Sales tax (7% on $21) +1.47
TotalDue $22.47
The retailer would report taxable sales of $21 on its sales tax return and remit state sales tax of
$1.15 ($21 x 5.5%) and local sales tax of $.32 ($21 x 1.5%) for a total of $1.47.
Manufacturer’sCoupon. When a customer uses a coupon for a discount or a free meal and the seller is
reimbursed by a third party for the discounted amount, sales tax is due on the full selling price of the meal
before subtracting the coupon amount. The coupon amount is taxed.
GroupDiscounts. When a seller offers a discount to all members of a particular group, such as senior
citizens, credit unions, or AAA members, the amount of the discount is not taxed unless a third party is
reimbursing the seller for the discounted amount.
Deal-of-the-Day Certicates
Thesaleofpromotional“deal-of-the-day”certicatesfromadvertisers,localradiostations,and
newspapersaretreatedinthesamemannerasgiftcerticates.Thesaleofthecerticateissales
taxexempt.
When the promotional deal is redeemed by the customer, sales tax is calculated on the full selling price of
the taxable sale. The amount of the promotional deal is then applied to the transaction.
Example6.A$50deal-of-the-daycerticateformealsatarestaurantissoldfor$25byalocalradio
station.Salestaxisnotcollectedonthistransaction.Whenthepurchaserofthecerticateredeemsthe
certicateonhisorhermealselection,salestaxiscalculatedbelow,assumingthecombinedstateand
local sales tax rate is 7%.
Meals $75.00
Sales tax @ 7.0% +5.25
Subtotal 80.25
Less-certicate -50.00
Netduefromcustomer $30.25
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 7
The restaurant would collect $30.25 from the customer ($25 for the sale of the meals and $5.25
in sales tax). On the sales tax return, the retailer would report taxable sales of $75 and remit state
sales tax of $4.13 ($75 x 5.5%) and city sales tax of $1.12 ($75 x 1.5%) for a total of $5.25.
Employee Meals
Amounts charged to employees for prepared food are taxable even if they are discounted. If prepared food from a
caterer, restaurant, or other food service provider is provided to employees without charge, use tax is not due on the
cost of the prepared food.
Food Sold by a Bar or Tavern
Bars and taverns which also sell a limited number of nontaxable food items (for example, milk,
cheese, and eggs), may sell these items exempt from sales tax when separate records are maintained.
The information shown on the customer’s invoice or cash register tape should provide an adequate
description of the nontaxable food items sold.
Gift Certicates
Salesofgiftcardsorgiftcerticatesarenotsubjecttosalestax.Whentheretailerissuingthecardor
certicateredeemsthecardorcerticateonasaleofpreparedfood,theretailerwillcomputesalestaxon
thetotalamountofthesalebeforedeductingthevalueofthecardorcerticate.
Occupation Taxes
Certain retailers of prepared food (for example, caterers. restaurants, and bars), which are located in
cities imposing an occupation tax on these businesses, may itemize the tax on their customer’s bill. The
occupation tax must be included in the sales price of the prepared food before calculating the applicable
sales tax. The business is not allowed to combine the occupation tax rate with the sales tax rate. See
“Occupation Taxes” information on DOR’s website.
Example 7. A customer purchases a meal at a restaurant in a city with a 2.5% occupation tax on
restaurants. The calculation of the invoice is shown below:
Meal $50.00
Occupation Tax (2.5%) +1.25 (remit to city)
Subtotal $51.25
7% Sales Tax (State 5.5% and City 1.5%) +3.59 (remit to DOR)
Total $54.84
Prepared Food and Beverage Delivery Service
Food delivery service companies that sell prepared food and beverages are retailers. This includes
businesses that make sales through their app, website, or similar platform including Multivendor
Marketplace Platforms. See the Prepared Food and Beverage Delivery Service Information Guide.
Purchases by Sellers of Prepared Food
The following items may be purchased tax exempt by sellers of prepared food by issuing a resale
certicate(Form13)atthetimeofpurchase:
v Food, food ingredients, and alcoholic beverages that will be resold to customers. Examples
include ingredients used to prepare meals, soft drinks, candy, chips, beer, liquor; and
v Single-use disposable food service items provided to customers. Examples include paper
napkins, paper place mats, straws, plastic utensils, and foam and paper cups.
Records
Sellers must maintain adequate accounting records to distinguish taxable sales of prepared food from tax
exempt sales of food and food ingredients.
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 8
Tips and Gratuities
When an amount or percentage for a tip or gratuity is mandatory and added by the seller to the
purchaser’s bill, the total charge is taxable. Discretionary tips or gratuities given by the purchaser are
not taxable even when charged to the customer’s bill instead of the customer giving the tip directly to
theserver.
Example8.MandatoryGratuity.A restaurant requires payment of a 15% gratuity on the total meal and
beverage charge for groups of eight or more. The combined state and local sales tax rate where the
restaurant is located is 6.5%. The calculation of the invoice is shown below:
Meals $160.00
Beverages +50.00
Subtotal $210.00
Gratuity (15% x $210) +31.50
Subtotal $241.50
Sales tax (6.5% x 241.50) +15.70
Total $257.20
Example9.DiscretionaryGratuity.
Meals $160.00
Beverages +50.00
Subtotal $210.00
Sales Tax (6.5% x 210) 13.65
Gratuity - added by customer +31.50
Total $255.15
Litter Fee
Retailers making sales of prepared food that is not consumed on the retailer’s premises (carry-out or
to-go sales) are required to pay the Nebraska Litter Fee on these sales (see the Nebraska Litter Fee
InformationGuide).
Sales to Exempt Entities
Sales to entities that are exempt from sales tax must be supported by a properly completed Nebraska
ResaleorExemptSaleCerticate,Form13, Section B. A list of entities that are exempt from tax is
provided in the Sales Tax Exemption Chart.
Resource List
Information Guides
v Nebraska Sales and Use Tax Guide for Bars, Taverns, and Restaurants
v Nebraska Sales and Use Tax Guide for Food, Food Ingredients, and Dietary Supplements
v Nebraska Litter Fee
v Prepared Food and Beverage Delivery Service
Nebraska Sales and Use Tax Regulations
v Reg-1-008, Records
v Reg-1-031, Coin-Operated Machines
v Reg-1-037, TradingStamps,Coupons,Certicates,Vouchers,ReimbursedPriceReductions,and
Group Discounts
v Reg-1-040, Alcoholic Liquors Consumed on the Premises
Nebraska Sales and Use Tax Guide for Prepared Food and Beverage Service Information Guide, June 2023, Page 9
v Reg-1-087, Food or Food Ingredients
v Reg-1-090,NonprotOrganizations
v Reg-1-091, Religious Organizations
v Reg-1-092, Educational Institutions
Miscellaneous
v Occupation Taxes Web Page
revenue.nebraska.gov
800-742-7474 (NE and IA), 402-471-5729
Nebraska Department of Revenue, PO Box 94818, Lincoln, NE 68509-4818
