United States

Missouri Supreme Court takes narrow view of grocery exemption


Missouri and many other states provide reduced sales tax rates and exemptions for groceries that are not intended to apply to prepared food sold in restaurants and similar establishments, and a wide variety of definitions and thresholds are used to distinguish between the two.

However, as the prepared food and grocery sales activities of both restaurants and traditional grocery stores have blurred together, the nuances of these reduced rate and exemption provisions have become the focus of significant litigation.

Most recently, the Missouri Supreme Court issued its decision in Krispy Kreme Doughnut Corp. v. Dir. of Revenue. The May 3, 2016, decision holds that doughnuts and other food items sold at Krispy Kreme stores did not qualify for the lower sales tax rate applicable under RSMO section 144.014 to retail sales of groceries because the weight of the evidence indicated that more than 80 percent of the gross receipts of Krispy Kreme stores were derived from the sale of food prepared for immediate consumption.

If your business is engaged in a mix of these activities, you should review state reduced rate and exemption provisions to determine whether, and to what extent, they apply.

Chris Baltimore


Chris provides a range of state and local tax services to businesses throughout the Midwest. Contact him at chris.baltimore@rsmus.com.

Areas of focus: State and Local TaxCredits and Incentives