The Colorado Department of Revenue recently addressed whether a restaurant’s purchase of pre-packaged dressing that was mixed with other food products to produce a condiment that was then sold to customers was subject to sales tax. Under Colorado law, when a restaurant provides condiments, napkins, plastic utensils, or carryout boxes to customers, the restaurant is considered the user and consumer of the items. As such, the restaurant must pay sales tax when it purchases these items from suppliers. The presumption underlying this rule is that the restaurant is not separately stating a price for the condiment (or other item) and is not purchasing it for resale to customers. In this instance, the restaurant was reselling the dressing to customers for a separately stated price, but was not reselling it in an unaltered state. Because the dressing at issue was mixed with other food products before it was sold, the Department concluded the restaurant was not making a wholesale purchase for resale. Although the restaurant’s purchases were not exempt as wholesale purchases for resale, the Department noted that Colorado exempts the purchase of food ingredients that become an integral or constituent part of a food product that is intended to be ultimately sold at retail for human consumption. In the Department’s view, a separately-stated price for a condiment such as the dressing would likely be a retail sale. Please contact Steve Metz at 303-382-7177 with questions on this General Information Letter.