While I bow to no one in my belief that sales tax rules are frequently stupid and often corrupt, it's worth noting that some of the laws make sense, even if convoluted, when you consider what they're intended to accomplish.
Depending on the state, food is frequently an exception - either not taxable or taxed at a lower rate. However, our elected officials want to make sure that there are certain foods that are NOT treated in this special way. Because we just can't possibly let someone have a Coke or a Milky Way tax-free. Our beloved politicians know better than the poor huddled masses. Although why they are OK with letting us eat potato chips and ice cream is beyond me.
These "weird" rules involve two objectives:
1. The politicians have to figure out a way of differentiating nontaxable food from food that they have decided is bad for us and is therefore taxable. The most common items that are taxed differently are candy and pop (or soda). That means intricate rules to differentiate candy from cookies, and similar gyrations to separate juice from orange drink.
Frankly, I'm not sure why cookies should get a pass. They're just as bad for you as a nice Peanut Butter Cup. And Hostess products? C'mon. What's the difference between a delicious Snowball and a Baby Ruth, other than some flour?
Here's the Sales Tax Guy solution. If it's sweet, it's taxable. Period. People drink too much orange juice anyway - bad for your teeth.
2. Possibly even more complicated is differentiating restaurants, whose sales are universally taxable (sometimes even at a higher rate), from places that also sell groceries. This would include delis, bakeries, etc. who function as grocery stores, but also as restaurants. For example, there are rules that say that if someone is sold six donuts, it's not taxable. But if you buy just two, then you're obviously going to stuff your face with them right away. And our betters want to make sure you pay sales tax on them.
And the Sales Tax Guy solution? If they walk out the door with it, and it's not sweet, it's not taxable. Done. Bakeries may complain, but do you think I'm going to let a little thing like sales tax stand between me and my chocolate eclair? Really?
Ohio comes to close to this rule. If food is sold to be eaten off the premises, then it's not taxable. Simple. They complicate things with beverages, but it's still much simpler than any other state. More about Ohio here.
There's a final rule that a few states have. This one is to make sure those nasty, icky businesses, who can't vote, don't get to take advantage of non-taxable food. In those states, they add "for home consumption only" to the criteria for exempt food. Or they'll do something else to insure that only individuals and families (voters) get to buy their food free from tax.
One solution to the whole problem is to make all food taxable. That REALLY simplifies things. But then you'd have people complaining that it just makes sales tax even more regressive. But that's a topic for my next post.
Or go with the Ohio method. Of course, that would mean the state would lose a lot of tax revenue - and we can't have that. But it would sure be less regressive - and really easy. And I'm thinking the voters would like it. Are you listening, politicians?
The Sales Tax Guy http://salestaxguy.blogspot.com
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