Gift Baskets That Contain a Combination of Taxable and Nontaxable Products

This article explains the proper Wisconsin sales and use tax treatment of gift baskets prepared by a retailer that contain a combination of taxable and nontaxable tangible personal property (i.e., products), which are sold for one non-itemized price, and which include a food product.

Gift Basket - More Than 50% of Items in Basket Are Taxable Products
The entire sales price of a gift basket containing taxable and nontaxable products, one or more of which is a food or food ingredient, is subject to Wisconsin sales tax if both of the following apply:

Example 1: Retailer A sells a gift basket for $30 that includes a basket, three oranges, two apples, and a box of candy. Retailer A's cost and selling price of each of the products included in the basket is as follows:

Item Cost Selling
Price*
 Basket
 Oranges
 Apples
 Candy
 Totals
     $1.00
     $3.00
     $2.00
   $12.00
   $18.00
     $3.00
     $4.00
     $4.00
   $19.00
   $30.00

Retailer A's sale of the gift basket is subject to tax. The oranges and apples are products that are not subject to tax. The basket and candy are products that are subject to tax. Since the purchase price and sales price of the taxable products (i.e., basket and candy) are 50% or more of Retailer A's total purchase price and sales price, respectively, of all the products included in the gift basket, the entire sales price of the gift basket (i.e., $30.00) is subject to the tax. Retailer A may purchase all of the products included in the gift basket without tax.

*The selling prices in this column are not itemized to the customer, but are the amounts these items would sell for if they were to be sold separately.

Gift Basket - 50% or Less of Items in Basket Are Taxable Products
The entire sales price of a gift basket containing taxable and nontaxable products, one or more of which is a food or food ingredient, is exempt from Wisconsin sales and use tax if both of the following apply:

In addition, the retailer will not owe any sales or use tax on its purchase of the products included in the gift basket, since one or more of the products included was a food or food ingredient.

Example 2: Retailer B sells a gift basket for $30 that includes a basket, fresh fruit, a package of hot cocoa mix, and a bag of candy. Retailer B's purchase price and selling price of each of the products is as follows:

Item Cost Selling
Price*
 Basket
 Fresh Fruit
 Cocoa Mix
 Candy
 Totals
     $1.00
     $6.00
     $3.00
     $2.00
   $12.00
     $3.00
   $15.00
     $7.00
     $5.00
   $30.00

Retailer B's sale of the gift basket is not subject to tax. The fresh fruit and cocoa mix are products that are not subject to tax. The basket and candy are products that are subject to tax. Since the purchase price and sales price of the taxable products (i.e., basket and candy) are less than 50% of Retailer B's total purchase price and sales price, respectively, of all the products included in the gift basket, the sale of the gift basket is not subject to tax. Even though the Retailer B's sale of the gift basket is not taxable, Retailer B may still purchase the basket and the candy without tax for resale.

*The selling prices in this column are not itemized to the customer, but are the amounts these items would sell for if they were to be sold separately.

Page last updated May 7, 2012