This Is How Sales Tax Gets Complicated


At some point in the course of sales tax discussions, things seem simple.

If something is a necessity, most states agree, it shouldn’t be taxed. So most states don’t tax basic groceries. If you’re buying prepared food in a restaurant, that’s clearly more luxurious than just buying groceries to cook at home, so most states tax restaurant food. But there’s actually a continuum from groceries to fine dining.

Is a carry-out pizza prepared food?

What if you have to cook it when you get it home?

And if it is a prepared food, then what about pizzas, frozen or in the deli, which you buy in a grocery store?

This is why we end up with cakes which are not subject to sales tax unless they come with a serving tool, in which case they’re taxable. Or bagels which are not subject to sales tax unless someone puts cream cheese on them for you. Or foods which are tax exempt at room temperature but taxed if they’re warm.

The most recent example is California’s current controversy over feminine hygiene products. Two members of the legislature are saying that these are essential items, not optional, so they shouldn’t be taxed. Others, noting perhaps that in Pennsylvania the feminine hygiene exemption was followed quickly by exemptions on diapers and toilet paper, say it’s a slippery slope.

Once people begin deciding what’s a necessity and what is optional in the grocery store, it quickly leads to controversy and arguments for exempting other things that seem equally important. And history shows that controversy leads to wacky tax laws.

At that point, detractors argue, taxes on the other items end up being raised to compensate for the lower revenues, creating de facto subsidies for those who use the exempted products. For feminine hygiene, the issue is complicated because some people see it as a women’s rights issue. In France last year, a similar proposal led to protests by women against those who voted against it. Opponents argued that shaving cream for men was also subject to sales tax, making sales tax an equal issue for both sexes. Sales tax exemptions for flourless candy doesn’t lead to such emotional reactions.

It’s fair to say that sales tax gets complicated very easily, and there’s not reason to think that it will be less complicated in the future. SalesTaxDataLINK is your solution.

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