SNAP and Sales Tax

SNAP, formerly the Food Stamp program, was recently cut from the Farm Bill by Congress. As it stands, the program won’t end in November but the amounts families will receive will greatly decrease. This is going to have some lasting effects on sales tax calculations for eligible food items because of the way SNAP works. If changes in SNAP will affect your business, read on for the scoop. SNAP is a food assistance program that families and individuals can use when they buy eligible food items, such as bread, fruits, and even seed for at home growing.

SNAP benefits can only be applied towards eligible food items and are first applied towards taxable items. For instance, if a SNAP participant buys $1 of bread that’s non-taxable and $1 of tomatoes that are taxable but only has $1 of SNAP benefits, the $1 will be applied to the tomatoes and no sales tax is paid. If the SNAP participant had also bought $1 of household cleaners, a ineligible SNAP item, and the household cleaner was taxable in that jurisdiction, the participant would pay the full cost of the household cleaner, including sales tax. With changes in SNAP, sales tax receipts may increase as benefits are reduced.

An average household of 4 people will see a reduction of $25 per month in SNAP benefits. This means that if the families can make up the difference, you’ll have $25 more worth of transactions to calculate sales tax for; if they can’t make up the difference, you’ll be losing out on sales. Whether your business is big or small, this means a lot of added costs to doing business while you’re not making any more money. Your business still receives the same payment for SNAP or non-SNAP purchases but the added time and money it takes to monitor more sales tax transactions can really add up quickly. SNAP changes are just one example of why your business needs to pay attention to pubic policy to be aware of what changes might occur and how to best prepare for the future

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