November 6, 2002

You request a letter ruling on behalf of *************** ("Supermarket") regarding the applicability of the Massachusetts sales tax to sales of whole and unsliced rotisserie chickens to be sold by Supermarket from restaurants or counters to be located inside certain of its test stores pursuant to a licensing agreement with *************** ("Corporation"). Additionally, you ask whether the applicability of the sales tax would be different if in-store seating is not available or the purchase is made through a front-end check-out register rather than in the designated restaurant or counter area.

Facts

Supermarket is a grocery store retailer doing business in Massachusetts. Corporation is a fast-food style restaurateur specializing in providing quick, convenient meals, featuring home-style entrees (rotisserie chicken, turkey, ham, and meatloaf), fresh vegetables, sandwiches, salads, soups, side dishes, and desserts for consumption on the restaurant premises or on a take-out or to-go basis. Corporation operates its restaurants in a number of states including Massachusetts.

Supermarket and Corporation have signed a test agreement whereby Supermarket will place Corporation restaurants or counters inside certain of its test stores. Pursuant to the agreement, Supermarket has been granted a license to use Corporation brand recipes according to Corporation's specifications and standards and its name and logo in signage and advertisement of the restaurant or counter area. As a licensee of Corporation, the sales, profit, and operating costs will belong to Supermarket. Corporation will receive royalty and advertising fees based on the volume of net sales generated by Corporation restaurants and counters.

In accordance with the agreement, Supermarket will manage all day-to-day operations including but not limited to: food preparation, inventory management, employment of associates, customer service, and collection of payment from customers including applicable sales tax. All employees working in the restaurant or counter area will be hired, trained, supervised, and compensated by Supermarket. Supermarket will carry the full line of Corporation related materials, supplies, products, foods, and proprietary items, which will be purchased by Supermarket from an approved Corporation supplier.

Supermarket will be responsible for the construction and maintenance of the restaurant or counter area. Store designs may include designated eat-in areas or take-out only counters. The designated eat-in area will be designed with seating for customers to sit and eat on the premises. Alternatively, customers may purchase items for consumption off the premises. Not all stores will have seating available.

Customers will place orders in the restaurant or counter area and may pay for the items there or at a front-end check-out register, where all other grocery purchases are made. Complete meals or single items will be available for purchase. Whole and unsliced rotisserie chickens will be available for purchase as a single item and will be sold by count.

Discussion

Under the Massachusetts General Laws, sales of food products for human consumption are exempt from sales tax. G.L. c. 64H, § 6(h). "Food products," as those words are used for purposes of the Massachusetts sales tax, include meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, and fruit and fruit products, but does not include meals sold by restaurants. Meals sold by restaurants are taxable. Id.

A "meal" is defined as "any food or beverage, or both, prepared for human consumption and provided by a restaurant, where the food or beverages is [ sic] intended for consumption on or off the restaurant premises, and includes food or beverages sold on a 'take out' or 'to go' basis, whether or not they are packaged or wrapped and whether or not they are taken from the premises of the restaurant." Id. A "restaurant" is defined in relevant part as "any eating establishment where food, food products, or beverages are provided and for which a charge is made, including but not limited to, a cafe, lunch counter, . . . snack bar, . . . vending machine, and any other place or establishment where food or beverages are provided, whether stationary or mobile, temporary or permanent; provided, however, that delicatessen, grocery, market or bakery stores shall not be considered eating establishments . . . except for any part of such a store which engages, [ sic] in the sale of dinners, luncheons, barbecued chicken, other than barbecued chicken sold whole and unsliced, sandwiches, snacks, pizzas, and other similar items which are commonly sold at snack bars, coffee shops or luncheon counters. . . ." Id. (emphasis added) .

Notwithstanding the all inclusive definition of "meal" quoted above, G.L. c. 64H, § 6(h) also provides that the following food or beverages sold by a restaurant for consumption off the restaurant premises are not a "meal," and, thus, not taxable: food sold by weight, liquid or dry measure, count, or in unopened original containers or packages, including, but not limited to, meat, bread, milk, specialty foods, cream and ice cream; provided that such foods are commonly sold in such manner in a retail food store which is not a restaurant. G.L. c. 64H, § 6(h). However, prepared meals, snacks, sandwiches, food platters, poultry, fish or meat items, or other food combinations, to the extent that such items are sold by a restaurant whose principal business is the preparation or sale of such items in such form as to be available for immediate consumption without further significant preparation, whether for on or off premises consumption, are considered a "meal" and are taxable even if sold by weight, liquid or dry measure, count, or in unopened original containers or packages. Id.

The sales tax on a restaurant meal, whether consumed on or off the restaurant premises, is 5% of the price of the meal. G.L. c. 64H, §§ 2 and 6(h). A grocery store will not be considered a "restaurant" selling "meals" subject to the 5% tax solely on account of the sale of whole and unsliced barbecue chicken. G.L. c. 64H, § 6(h). However, if in addition to whole and unsliced barbecued chicken, other hot and cold meal and beverage items also are sold, then, that part of the grocery store in which such foods are sold is considered to be a "restaurant," and the items sold in such restaurant part, including sales of whole and unsliced barbecue chicken, are considered to be "meals" subject to the 5% tax. Id.

Once operational, Supermarket, not Corporation, [1] will sell complete meals and single items such as whole and unsliced rotisserie chickens from the Corporation restaurants or counters to be located inside its stores. Accordingly, once operational, these restaurants or counters will qualify as a restaurant part of a grocery store. As a restaurant part of a grocery store, sales by such restaurants and counters of whole and unsliced barbecued chickens would clearly be subject to the Massachusetts sales tax under G.L. c. 64H, § 6(h) because they would be sold along with other hot and cold meal and beverage items. There is no reason, statutory or otherwise, why the same result should not apply to sales of rotisserie chickens. "Barbecue," as it is commonly defined, includes meat roasted over an open fire or on a spit. The American Heritage Dictionary 157 (2d ed. 1985). Certainly, spit roasted chicken would include rotisserie chicken. Accordingly, it is ruled that sales of whole and unsliced rotisserie chickens, along with other hot and cold meal and beverage items, by restaurants or counters bearing the name of Corporation to be located inside Supermarket stores will be subject to the Massachusetts sales tax. G.L. c. 64H, § 6(h).

The fact that whole and unsliced rotisserie chickens will be available for purchase as a single item and will be sold by count does not change the above ruling. Because they will be available for immediate consumption without further significant preparation, whether for on or off premises consumption, they are considered a "meal" under G.L. c. 64H, § 6(h) and will be taxable even if sold by count. Id.

The unavailability of in-store seating also does not change the above ruling. Sales of whole and unsliced rotisserie chickens, along with other hot and cold meal and beverage items, sold by a restaurant part of a grocery store are subject to sales tax under G.L. c. 64H, § 6(h), regardless of whether in-store seating is available or the chickens are sold on a take-out or to-go basis. Likewise, the tax status of whole and unsliced rotisserie chickens is not dependent upon whether they are paid for at a front-end check-out register or in the designated restaurant or counter area.

Conclusions

Irrespective of in-store seating or the location of the check-out register, it is ruled that sales of whole and unsliced rotisserie chickens by Supermarket from Corporation licensed restaurant or counter areas to be located within Supermarket stores will be subject to the Massachusetts sales tax.

Very truly yours,

/s/Alan LeBovidge

Alan LeBovidge
Commissioner of Revenue

AL:DMS:ps

LR 02-11



[1] Supermarket, not Corporation, will manage all day to day operations including inventory management ( i.e., ordering, purchasing, and cooking of the foods, materials, supplies, products, and proprietary items carried), employment of associates, customer service, and collection of payment from customers including applicable sales tax. All employees working in the restaurant or counter area will be hired, trained, supervised, and compensated by Supermarket, not Corporation. Finally, the sales, profit, and operating costs generated or incurred will belong to Supermarket, not to Corporation. Thus, the restaurants or counters to be located inside Supermarket's stores will not be stand-alone restaurants.