Restaurants and Bars
*This information is for Model City Tax Code purposes only.
(a) The tax rate shall be at an amount equal to _______ percent (___%) of the gross income from the business activity upon every person engaging or continuing in the business of preparing or serving food or beverage in a bar, cocktail lounge, restaurant, or similar establishment where articles of food or drink are prepared or served for consumption on or off the premises, including also the activity of catering. Cover charges and minimum charges must be included in the gross income of this business activity.
(b) Caterers and other taxpayers subject to the tax who deliver food and/or serve such food off premises, shall also be allowed to exclude separately charged delivery, set-up, and clean-up charges, provided that the charges are also maintained separately in the books and records. When a taxpayer delivers food and/or serves such food off premises, his regular business location shall still be deemed the location of the transaction for the purposes of the tax imposed by this Section.
(c) The tax imposed by this Section shall not apply to sales to a qualifying hospital, qualifying community health center or a qualifying health care organization, except when sold for use in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512.
(d) The tax imposed by this Section shall not apply to sales of food, beverages, condiments and accessories used for serving food and beverages to a commercial airline, as defined in A.R.S. Section 42-5061, that serves the food and beverages to its passengers, without additional charge, for consumption in flight.
(e) The tax imposed by this Section shall not apply to sales of prepared food, beverages, condiments or accessories to a public educational entity, pursuant to any of the provisions of Title 15, Arizona Revised Statutes, to the extent such items are to be prepared or served to individuals for consumption on the premises of a public educational entity during school hours.
(f) the tax imposed by this section shall not apply to sales of low or reduced cost articles of food or drink to eligible elderly or homeless persons or persons with a disability by a business subject to tax under A.R.S. SECTION 42-5074 that contracts with the Department of Economic Security and that is approved by the food and nutrition service of the united states department of agriculture pursuant to THE SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM ESTABLISHED BY THE FOOD AND NUTRITION ACT OF 2008 (P.L. 110-246; 122 STAT. 1651; 7 United States Code Sections 2011 through 2036a), if the purchases are made with the benefits issued pursuant to the SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM.
(g) the tax imposed by this section shall not apply to sales by a nonprofit organization that is exempt from taxation under Section 501(C)(3), 501(C)(4) OR 501(C)(6) of the Internal Revenue Code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual. this paragraph does not apply to an organization that is owned, managed or controlled, in whole or in part, by a major league baseball team, or its owners, officers, employees or agents, or by a major league baseball association or professional golfing association, or its owners, officers, employees or agents, unless the organization conducted or operated exhibition events in this state before January 1, 2018 that were exempt from taxation under A.R.S. SECTION 42-5073.
(h) if a city, town or other taxing jurisdiction imposes a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on the sale of food items intended for human consumption as defined by rule adopted pursuant to A.R.S. SECTION 42-5106 or items prescribed by A.R.S. SECTION 42-5106, Subsection d for consumption on the premises, the tax must be applied uniformly with respect to all food items, and an additional tax or fee differential may not be assessed or applied with respect to any specific food item.
(i) For the purposes of this Section, "accessories" means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption of the food.