The Basics of Food-Related Taxes in Texas

Each state taxes food and beverages in one way or another. Since the laws can vary so greatly from state to state, it is best not to assume what will be taxed or not. Texas has some of the most confusing food and beverage tax laws; here’s a brief rundown of the basics. 

Grocery Items

Most grocery items (fresh, frozen, canned, and otherwise) are not usually taxable items. There are a couple of exceptions to this rule when it comes to snack foods. Snack foods that weigh less than 2.5 oz are taxable. This includes candy and gum. However, boxes containing many snack foods, like a box of donuts, might not be taxable because the overall weight is higher. Oddly enough, anything containing a high enough amount of cow’s milk is not likely to be taxed, as milk is a tax-free drink in Texas. 

Prepared Foods

Prepared foods, like those used in restaurants or delis, can be taxed. There are some strange rules in regards to this as well. Food that is served with utensils is taxed, but food that does not require utensils is usually not. For this reason, a biscuit from a bakery might not be taxed, while your meal at the local diner will be taxed at a rate of 6.5%.

Non-Alcoholic Beverages

Non-alcoholic beverages are not taxed if they contain cow’s milk, even if the milk is mixed with something (such as coffee beverages or chocolate milk). Drinks containing at least 50% fruit juice are also not taxed. Soft drinks and drinks containing less than 50% fruit juice and no milk are taxed.

Alcoholic Beverages 

Most, if not all, alcoholic beverages in Texas are likely to be taxed. Businesses need a Texas alcohol permit to sell alcohol; this includes both restaurants and stores. At 8.25% (as of 2021), Texas’s alcohol tax is considerably higher than the food tax. Keep this in mind when budgeting.

Keep these tax laws in mind as you budget for your next grocery trip. Stick to non-taxable goods to keep your bill lower.