You have decided to sell your homemade baked goods to make a little extra money. You have contacted the South Dakota Department of Revenue and have your sales tax license and are all set to go, right? Well, do you know how much tax to charge? This article will discuss the Municipal Gross Receipts Tax (MGRT) and when it needs to be added to purchases.

Taxes and Rates that may apply to a retail business.

• State Sales and Use Tax 4%
• Municipal Sales and Use Tax 1 to 2%
• Municipal Gross Receipts Tax 1%

MGRT is applicable where the public is invited to eat, dine, or purchase and carry out prepared food for immediate consumption. The 1% MGRT is in addition to the state sales tax and municipal sales tax. To be subject to the 1% MGRT tax, the food must be prepared by the seller and be for immediate consumption. The MGRT does not apply to food that is subject to use tax such as food that is given away.

Catering: Individuals or businesses providing catered prepared foods or beverages owe state tax, applicable municipal tax, and applicable MGRT on their receipts from preparing or serving such foods and beverages. A cake delivered to the customer is catering and is subject to the MGRT. A cake that is picked up at the store is subject to state and applicable municipal sales tax only, not the MGRT

Bakeries: Bakeries are places where the public is invited to purchase and carry out prepared food. In some shops the public may also eat at that shop. All bakery items are prepared food; however, some items are not for immediate consumption. If the food generally requires further preparation by the customer such as heating, cooking, or combining with other products, then it is not subject to the MGRT.

Examples of bakery items made by the seller that are subject to MGRT are:

• Rolls, such as cinnamon rolls, Biscuits, Bagels, Bars, Cakes - if delivered, Cookies - cookie bouquets, Croissants, Donuts, Danish, Pastries, Tortes, Tarts, Muffins

Examples of bakery items not subject to MGRT:

• Breads, buns, whole pies or cakes sold for home consumption are not considered for immediate consumption, therefore not sub¬ject to the MGRT.
• Bakery items sold by a business other than the bakery (such as a convenience or grocery store) are subject to the MGRT when the seller further prepares the bakery item (such as heating or combining with other products) or they serve the bakery item on a plate or with utensils. If sold without further preparation or utensils, then it is not subject to the MGRT.

For more information regarding sales and use taxes, visit the South Dakota Department of Revenue’s website or call 1-800-TAX-9188.