1. (1) Definitions. For purposes of this rule, the following definitions apply:

   1. (a) “Store” means the location from which a taxpayer sells goods at retail to the final consumer for home consumption. “Store” includes both physical locations and online storefronts.
   2. (b) “Consignment” refers to a model whereby groceries sold at retail are owned by one person, but the sale of such products is effected by a separate person which receives a commission or fee from the product owner for their role in effecting the sale.
2. (2) Excludable receipts from retail sales. Receipts from retail sales of groceries, including groceries sold by consignment, are excludable from a taxpayer’s commercial activity under ORS 317A.100(1)(b)(EE). The exclusion applies only to receipts from the sale of groceries as that term is defined in ORS 317A.100(8), which are sold at retail to the final consumer for home consumption. The determination as to whether an item is sold to a consumer for home consumption is based on the type of item sold and the circumstances of the sale. The determination is based on whether the seller typically expects that the sale of food from a specific store is purchased for home consumption.

3. (3) Factors indicating home consumption. The determination as to whether a store typically sells groceries for home consumption rests on specific facts and circumstances. When determining whether a store typically makes grocery sales for home consumption, the department will consider factors such as (but not limited to):

   1. (a) Whether the store’s average gross receipts from the sale of hot food is greater than the average gross receipts from the sale of groceries.
   2. (b) Whether the store offers on-site dining facilities, and if so, whether the percentage of total floor space allotted to dining facilities for customers is greater than the percentage of floor space dedicated to shelves displaying groceries available to customers for retail sale.
   3. (c) Whether the store advertises itself as being engaged in the sale of hot food or ready-to-eat food.
4. (4) The list of factors in section (3) is nonexclusive, and the factors will be considered only to the extent that they are relevant. The department may consider any other relevant facts and circumstances.

5. (5) Examples.

   Example 1: McPherson’s Convenient Coffee Shop is located on the first floor of a large office building and is open from 6:00 a.m. to 3:00 p.m. Monday through Friday. McPherson’s sells hot coffee and an assortment of baked goods, which are warmed or toasted before being served to the customer. In addition, McPherson’s sells a variety of packaged snacks, candy, bottled water and juice. The store has little on-site seating; most customers consume the purchased food off-site. McPherson’s markets itself as a convenient place for office workers to buy a cup of coffee or purchase a quick mid-day snack. Seventy-five percent of McPherson’s sales are from hot foods. Based on the business’s advertising and the fact that the majority of gross receipts are from hot prepared food, McPherson’s does not typically intend or expect the food items sold from their store to be consumed at the purchaser’s home. Therefore, McPherson’s may not exclude any receipts under ORS 317A.100(1)(b)(EE). Example 2: Clarendon’s Cupboard is a small neighborhood convenience store open seven days a week from 5:00 a.m. to 11:00 p.m. Clarendon’s sells a wide variety of items, including cigarettes, tobacco, bottled soda, candy, and some grocery staples, such as bread, eggs, milk, and cheese. From noon to 3:00 p.m., Clarendon’s also sells hot prepared food for immediate consumption, such as hot dogs, fried chicken, and hot pizza by the slice. Clarendon’s does not offer any on-site seating. Clarendon’s advertises itself as a convenient place to buy cigarettes, purchase a hot lunch or a quick snack, and pick up a few groceries on the way home from work. Sales of cigarettes, tobacco, and other nonfood items constitute sixty percent of Clarendon’s gross receipts. Receipts from the sale of cold food (i.e., grocery staples and various snacks and candy items) constitute thirty percent of Clarendon’s gross receipts, while receipts from the sale of hot prepared food (i.e., hot dogs, and hot prepared pizza) constitute less than ten percent of Clarendon’s gross receipts. Based on the business’s advertising, and the fact that Clarendon’s gross receipts from the sale of cold food outweigh the gross receipts from the sale of hot food, the food items sold by the store are typically intended for the purchaser’s consumption at home. Clarendon’s may exclude receipts from the sale of grocery staples and snacks, as these items are “groceries” as defined in ORS 317A.100(8). Clarendon’s may not exclude receipts from the sale of hot prepared food such as hot dogs and hot pizza, as these items are not groceries. Example 3: Frontier Foods is a corporation which owns products meeting the definition of groceries under ORS 317A.100(8). Frontier Foods contracts with Consignment Shop Operator to sell these groceries on consignment at retail to consumers for home consumption. Consignment Shop Operator is paid a periodic commission by the Frontier Foods corporation based on their store’s sales. Consignment Shop Operator may exclude the portion of the commission paid to them by the Frontier Foods corporation and attributable to the sale of groceries intended for home consumption. Additionally, the Frontier Foods corporation may also exclude receipts attributable to the sale of groceries intended for home consumption.

6. (6) Safe Harbor for Stores Authorized as Retail Food Stores Under 7 U.S.C. 2012(o) or Qualifying as Retail Food Stores for Purposes of the Supplemental Nutrition Assistance Program (SNAP). The sale of a grocery item, as defined in ORS 317A.100(8), by a store authorized as a retail food store under 7 U.S.C. 2012(o), with a valid permit as a SNAP qualified retail food store from the U.S. Department of Agriculture, is considered the retail sale of groceries for home consumption and excluded from the taxpayer’s commercial activity. Receipts from the sale of groceries realized by a store that meets the requirements to qualify as a retail food store under 7 U.S.C. 2012(o), regardless of whether the store holds a permit as a SNAP qualified retail food store from the U.S. Department of Agriculture, are also considered the retail sales of groceries for home consumption and are excluded from the taxpayer’s commercial activity, provided that the taxpayer can demonstrate that the store meets the requirements to qualify as a retail food store under 7 U.S.C. 2012(o).

7. (7) A store may not exclude receipts under ORS 317A.100(1)(b)(EE), if the store’s receipts from the sale of hot food or hot prepared food constitutes 80 percent or more of the total receipts that the store realized from the sale of all food items. The fact that the store’s receipts are at least 80 percent from sales of hot food or hot prepared food is evidence that the store does not intend to sell, or typically sell, groceries to the final consumer for home consumption; therefore, sales from the store are not excludable as retail sales of groceries.

   [Publications: Contact the Oregon Department of Revenue for information about how to obtain a copy of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360(2) and ORS 183.355(1)(b).]

Statutory/Other Authority

ORS 305.100 & 317A.143

Statutes/Other Implemented

ORS 317A.100(1)(b)(EE) & 317A.100(8)

History

REV 17-2021, amend filed 12/15/2021, effective 01/01/2022
REV 11-2020, adopt filed 06/24/2020, effective 06/28/2020
REV 2-2020, temporary adopt filed 01/27/2020, effective 02/01/2020 through 07/29/2020