"In Michigan, all food is exempt, unless it is served in a restaurant."
I know, but why should that be? The food is food, it is an essential, because it was prepared? What about frozen dinners, they are prepared, just need to be heated.
"To raise another point, the cheese in mac and cheese and the potatos in potato chips would be exempt anyway, because they are for business use. The business use exemption, while preventing the compounding of tax, requires that "business use" be defined and enforced. This creates a whole other set of problems."
The business is not consuming the cheese or potatos, they are processing them for resale. The consumer is the one that pays the taxes on the "finished product".
If I had to guess, I would say because eating in a restaurant is considered a luxury.