Sales Tax, Fees, and Refund Obligations Under Federal SNAP Regulations

Retailers authorized to accept Supplemental Nutrition Assistance Program (SNAP) benefits must adhere strictly to federal regulations governing the processing of transactions. Failure to comply may result in administrative sanctions, including disqualification, civil monetary penalties, or allegations of trafficking under 7 U.S.C. § 2024.

The following guidance outlines key compliance requirements related to sales tax, fees, and refunds.

Sales Tax Treatment of SNAP Transactions

Under federal law, SNAP benefits may only be used to purchase eligible food items and may not be used to pay for state or local sales taxes.

Retailers are prohibited from assessing sales tax on items purchased with SNAP benefits.
In mixed-payment transactions (i.e., SNAP combined with cash, credit, or debit), sales tax may be applied only to items not paid for with SNAP benefits.
Where a customer uses manufacturer or store-issued coupons, sales tax may be assessed on the portion of the purchase price attributable to the coupon. However, such tax must be paid using a non-SNAP form of payment.

Improper taxation of SNAP purchases may constitute a program violation and expose the retailer to enforcement action.

Prohibition on Use of SNAP Benefits for Fees

SNAP benefits cannot be used to pay for ancillary fees or charges, even where such fees are uniformly imposed on all customers.

Retailers must ensure that all fees are paid באמצעות alternative tender. Prohibited uses of SNAP benefits include, but are not limited to:

Charges for bags or containers
Delivery or service fees
Processing or transaction fees
Manufacturer-imposed bottle deposits, including those embedded in the shelf price

Limited Exception: Bottle deposit fees mandated by state law may be paid with SNAP benefits.

Retailers should maintain clear point-of-sale procedures to segregate eligible food purchases from non-eligible fees.

Refund Requirements and Trafficking Risk

Federal regulations require that all refunds for SNAP purchases be handled electronically:

Refunds must be credited directly back to the customer’s SNAP EBT account via the retailer’s point-of-sale (POS) system.
Cash refunds are strictly prohibited.

Issuing cash or cash equivalents in exchange for SNAP benefits constitutes trafficking, a violation of federal law under 7 U.S.C. § 2024(b). Trafficking violations carry severe penalties, including permanent disqualification from the program and potential criminal liability.

Conclusion

Strict adherence to SNAP transaction rules is not optional—it is a legal obligation. Retailers should implement internal controls, employee training, and POS safeguards to ensure compliance at all times. Even inadvertent violations may trigger significant enforcement consequences.

Sales Tax, Fees, and Refund Obligations Under Federal SNAP Regulations