We own a bakery in East Lansing, Michigan. We sell baked goods on premise as well as separate ingredients. Our customers include individual consumers as well as restaurants that resell our baked goods. We always though that bakeries don't need to charge sales tax in Michigan are we incorrect?

ANSWER

The BIDaWIZ Team's Answer:

The sales tax rules governing bakeries in Michigan are actually complex. The rules state that baked goods sold for home consumption (i.e. individual consumers) are not considered prepared foods and exempt from sales tax. This would include bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas, sold without eating utensils. However, if the items are prepared foods, then they are subject to sales tax. An example would be a food served at a heated state such as a hot sandwich.

If your company sells to other businesses, those sales are generally subject to sales tax if they become a component or ingredient to in another item sold.

References: Michigan Legislative Section 205.54g; Michigan Administrative Code Section R 205.56
State: Michigan
Sales tax category: Product Taxability, Tax Compliance
Product/Service: Food