HB 1340
In CommitteeHouse
Prepared food sales tax
Exempting prepared food from sales tax.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill removes sales tax on most prepared food sold in Washington, effective July 1, 2025 — including hot meals, pre-made sandwiches, and food served with utensils — but only if the seller’s prepared food sales are 75% or less of total food sales. Meals for seniors and low-income residents in certain programs remain exempt. Soft drinks, bottled water, dietary supplements, and vending machine sales remain taxable.
- Exempts most prepared food from Washington’s 6.5% state sales tax (plus any local taxes), effective July 1, 2025.
- Defines 'prepared food' as food sold heated, food sold with utensils provided by the seller, or food combining multiple ingredients — with exceptions for raw ingredients, bakery items, and manufacturers.
- Sets a 75% sales threshold: businesses where prepared food makes up more than 75% of total food sales must collect tax on all prepared food; others may be exempt if items are sold without utensils and not heated.
- Exempts meals served through state-administered nutrition programs for seniors, people with disabilities, and low-income individuals, even if served by nonprofits or senior housing facilities.
- Continues to tax soft drinks, bottled water, dietary supplements, and food sold through vending machines (with special tax calculation rules for vending machines).
Who is affected
- Food service businesses — Restaurants, cafes, food trucks, and other food service businesses that sell prepared food — they will no longer collect sales tax on most prepared food sales, but must track and report prepared food sales percentages to determine applicability of the exemption.
- Grocery and convenience stores — Grocery stores and convenience stores that sell prepared food (e.g., hot deli items, pre-made meals) — they may be exempt if prepared food sales are ≤75% of total food sales, but must calculate and report their annual prepared food sales percentage.
- Vulnerable populations receiving meal services — Senior citizens, low-income individuals, and people with disabilities who receive meals from nonprofit or government programs — meals provided under certain state or federal nutrition programs remain exempt from sales tax.
- Vending machine operators — Vending machine operators — sales of soft drinks, bottled water, and hot prepared food through vending machines remain taxable, with special rules for calculating tax on such sales.
Pro/Con Analysis
Potential Benefits (5)
Exempting prepared food from sales tax reduces the out-of-pocket cost of meals for seniors and low-income individuals enrolled in state-administered nutrition programs, improving access to affordable, ready-to-eat meals — especially important for those managing chronic conditions or limited mobility.
HealthcarePeopleRef: Sec. 1(1) and Sec. 1(3)The exemption for unheated food sold by weight or volume (e.g., deli counter meats, salads) and bakery items helps low- and middle-income households stretch food budgets, especially for families relying on grocery store prepared sections for convenience — though the 75% threshold limits full benefit for pure food-service businesses.
HousingPeopleRef: Sec. 1(1) and Sec. 1(2)(c)(i)(C)(B)Eliminating sales tax on prepared food lowers the price of daily meals for all consumers — estimated at $0.40–$0.65 per meal — providing modest but cumulative savings for working families, especially those eating out or buying convenience meals multiple times per week.
FinancialPeopleRef: Sec. 1(1)Grocery and convenience stores with ≤75% prepared food sales gain full exemption for their prepared food, potentially increasing foot traffic and cross-sales — though the benefit is unevenly distributed, as many grocery chains already operate below the threshold while restaurants above it face no relief.
Business & EmploymentLean peopleRef: Sec. 1(2)(c)(ii)(C)(I)By preserving tax exemption for meals served to seniors and people with disabilities in nonprofit or low-income housing settings, the bill supports community-based care infrastructure — reducing strain on emergency services and hospital readmissions tied to malnutrition or food insecurity.
Public SafetyLean peopleRef: Sec. 1(3)(a)-(c)
Potential Concerns (5)
The bill eliminates sales tax on most prepared food, reducing state and local tax revenue by an estimated $250 million over the 2025–27 biennium. This reduction will strain public budgets, potentially leading to cuts in essential services like education, public safety, and infrastructure maintenance — services that lower- and middle-income households rely on most heavily.
Local GovernmentRef: Sec. 1(2)(c)(ii)(C)(I)The 75% sales threshold creates complex compliance burdens for mixed-format businesses (e.g., grocery stores with hot deli counters), requiring annual tracking and reporting of prepared food sales percentages. Small and mid-sized businesses lack the resources of large chains to manage this administrative overhead efficiently, increasing operational costs and potential noncompliance risk.
Business & EmploymentRef: Sec. 1(2)(c)(ii)(C)(I) and Sec. 1(2)(c)(ii)(C)(II)While the bill includes exemptions for meals served to seniors and low-income individuals in certain programs, it does not address broader affordability of prepared food for working-class households who rely on affordable takeout or convenience meals — many of whom earn too much to qualify for nutrition programs but not enough to absorb repeated $10–$15 meal costs after tax removal.
HousingRef: Sec. 1(2)(c)(ii)(C)(I)Revenue loss from the tax exemption may reduce funding for local law enforcement, emergency response, and fire services — particularly in rural and under-resourced counties that rely heavily on sales tax revenue, potentially increasing public safety risks for everyday residents.
Public SafetyRef: Sec. 1(2)(c)(ii)(C)(I)The rule that four-or-more-serve packages are not considered “sold with utensils” unless utensils are *physically handed* creates ambiguity for takeout orders and drive-thrus, increasing compliance uncertainty for food service businesses and potentially leading to inconsistent tax collection and audits.
Business & EmploymentRef: Sec. 1(2)(c)(ii)(C)(II)
Who Is Most Affected
Low- and middle-income households benefit from lower food costs, especially those relying on prepared meals due to time, health, or mobility constraints — though savings are modest and may be offset by reduced public services.
Grocery and convenience stores with diversified food sales (e.g., deli counters, bakery sections) may see increased sales volume and reduced tax compliance burden if their prepared food sales stay ≤75%. Pure food-service businesses (e.g., restaurants) face no tax relief and may lose customers to grocery stores offering cheaper prepared options.
Restaurants, food trucks, and cafés — especially those with >75% prepared food sales — bear no tax relief and may face increased competition from grocery stores offering untaxed prepared food, potentially reducing revenue and employment.
Seniors and low-income individuals in state nutrition programs retain full meal access without tax burden — a targeted benefit that improves nutritional outcomes and reduces financial stress for vulnerable populations.
Local governments lose $250M over two years, disproportionately affecting rural and high-need jurisdictions that rely heavily on sales tax revenue for core services — potentially leading to service cuts that harm everyday residents most.