Bakery Resale Certificate Guide: Buy Flour, Sugar, and Supplies Tax-Free

Bakeries buy ingredients in bulk. A busy retail bakery might go through 500 pounds of flour, 200 pounds of sugar, and 50 pounds of butter every week. A wholesale bakery supplying restaurants and grocery stores buys even more. Sales tax on those ingredient purchases adds up quickly.

A resale certificate lets you purchase ingredients, packaging, and other materials tax-free when they become part of products you sell. For bakeries, this is one of the clearest applications of the resale exemption: you buy raw ingredients, transform them into baked goods, and sell the finished product.

But bakeries also face unique tax rules around prepared food, eat-in versus take-out, and grocery versus restaurant classification. This guide covers all of it.

Bakery

How Resale Certificates Work for Bakeries

You buy flour, sugar, eggs, butter, chocolate, and packaging. You combine those ingredients into cakes, bread, pastries, and cookies. You sell the finished products to customers. The ingredients and packaging are resale items because they become part of the product the customer purchases.

The savings are significant. A bakery spending $4,000 per month on ingredients and packaging saves $3,360 per year at a 7% tax rate. A larger operation spending $10,000 per month saves $8,400 annually.

Apply for Your Resale Certificate

What You Can Buy Tax-Free

Tax-Exempt Purchases (Resale Items)

Every ingredient and material that becomes part of your finished baked goods qualifies:

• Flour (all-purpose, bread flour, cake flour, specialty flours)
• Sugar and sweeteners (granulated, powdered, brown sugar, honey, corn syrup, molasses)
• Butter, shortening, and oils
• Eggs and dairy (milk, cream, cream cheese, sour cream)
• Chocolate, cocoa, and candy coatings
• Yeast, baking powder, baking soda, and leavening agents
• Flavorings and extracts (vanilla, almond, lemon, food-grade essential oils)
• Food coloring and decorating supplies (sprinkles, fondant, gum paste, edible glitter)
• Nuts, dried fruits, and fillings
• Packaging (cake boxes, bread bags, cupcake liners, doilies, cellophane wrap, ribbons)
• Labels and stickers for product packaging
• Cake boards and drums

What You CANNOT Buy Tax-Free

Items used in your bakery operations but not transferred to customers:

The Gray Area: Items Used Up in Baking

Parchment paper, cooking spray, and pan grease present a gray area. They are used during the baking process but do not become part of the finished product. In most states, these are taxable because they are consumed rather than resold.

Cupcake liners and paper baking cups are different. They do transfer to the customer as part of the finished product. These qualify for tax-free purchase.

Prepared Food Tax Rules: The Big Bakery Question

Here is where bakery tax gets complicated. Many states have different tax rates (or no tax at all) for food purchased for home consumption versus prepared food eaten on premises.

The General Rule

Most states that exempt groceries from sales tax still tax "prepared food." A bakery straddles both categories:

• Unheated baked goods sold for off-premises consumption (a loaf of bread, a box of cookies, a cake picked up for a party) are often treated as grocery items and may be exempt from sales tax or taxed at a reduced rate.
• Heated food, food with utensils, or food consumed on premises (a warm croissant eaten at your cafe table) is typically treated as prepared food and taxed at the full rate.

State Variations

The rules vary dramatically by state:

This distinction matters for your bottom line. If your bakery sells mostly unheated, packaged goods (bread, cookies, cakes for pickup), you may owe little or no sales tax on those sales in states that exempt grocery items. If you operate a bakery cafe with seating, your eat-in sales are typically taxable.

Either way, your ingredients are still purchased tax-free with your resale certificate. The question is what you charge your customers.

Wholesale Bakeries: Selling to Other Businesses

If you sell baked goods wholesale to restaurants, grocery stores, or cafes, the transaction is even simpler. Your business customers should provide you with their resale certificates, and you sell to them without charging sales tax. They collect tax when they sell to the end consumer.

Keep copies of every resale certificate your wholesale customers provide. If audited, you need documentation proving that tax-free sales were legitimate B2B resale transactions.

Dollar Savings for Bakeries

For a wholesale bakery spending $15,000 per month on ingredients, the annual savings of $12,600 pays for a part-time employee or a significant equipment upgrade.

State-Specific Notes

California

California exempts most food products sold for human consumption from sales tax. Baked goods sold unheated and without eating utensils for off-premises consumption are exempt. If you sell heated items, provide utensils, or have seating areas, those sales become taxable. Your ingredient purchases remain exempt with a seller's permit regardless.

Texas

Texas does not tax most food items, including baked goods sold unheated. Bakeries with seating areas or that sell heated items must collect tax on those prepared food sales. Ingredients purchased for baking are exempt with a resale certificate.

New York

New York exempts food sold for off-premises consumption but taxes food sold in restaurants or as prepared food. A bakery selling unheated cakes and bread to-go does not collect sales tax. A bakery cafe selling coffee and a heated croissant for dine-in does. Ingredient purchases are exempt with Form ST-120.

Florida

Florida exempts most grocery food from sales tax but taxes prepared food. Baked goods are generally exempt when sold unheated and packaged for take-out. Items sold for immediate consumption (at a counter, with plates) are taxable.

Common Mistakes Bakeries Make

Not Understanding the Prepared Food Distinction

Many bakery owners charge sales tax on everything or, worse, charge tax on nothing. Learn your state's rules about prepared versus unprepared food. The distinction between a boxed cake (often exempt) and a slice of cake eaten at your counter (often taxable) can be significant.

Buying Equipment With a Resale Certificate

Your new stand mixer is not resale inventory. Neither is your oven or your display case. These are business assets. Pay sales tax on equipment purchases.

Ignoring Cottage Food Laws

If you run a home-based bakery under a cottage food license, you still need a resale certificate to buy ingredients tax-free (assuming your state allows cottage food businesses to obtain one). Some states have revenue limits for cottage food operations that affect your tax obligations.

Not Collecting Tax When Required

Even if your baked goods are exempt from sales tax as grocery items, other items you sell (gift baskets with non-food items, branded merchandise, beverages in some states) may be taxable. Know what is and is not taxable in your product mix.

How to Get Started

Step 1: Apply for Your Resale Certificate

Apply through your state's tax authority or use our application service. You will need your business information and EIN (or SSN for sole proprietors).

Step 2: Set Up Wholesale Accounts

Provide your resale certificate to ingredient suppliers (restaurant supply stores, wholesale food distributors like US Foods, Sysco, or specialty suppliers). They will exempt your purchases from sales tax.

Step 3: Learn Your State's Food Tax Rules

This is critical for bakeries. Understand which of your products are exempt (grocery items) and which are taxable (prepared food). Set up your point-of-sale system to apply the correct tax rates.

Step 4: Collect and Remit Sales Tax

Charge the correct tax on taxable items, file your returns, and remit the tax on schedule. Keep records separating taxable and exempt sales.

Apply for Your Resale Certificate

Related Articles

• Food Truck and Restaurant Resale Certificate Guide
• What Can You Buy Tax-Free With a Resale Certificate?
• How to Set Up a Wholesale Business