Update, 5.15.14: The Streamlined Sales Tax Governing Board approved an amendment to the definition of “prepared foods” during its spring governing board meeting.
According to Tax Analysts, the amendment expands the list of enumerated items allowed “to be taxed differently than ‘prepared foods’ and each other” to include, “Food sold that ordinarily requires additional cooking or baking (as opposed to just reheating) by the consumer prior to consumption.”
The amendment should enable SST states to exempt take-n-bake pizza without having to change their laws.
Some tax laws are crazy. Of the crazies, food tax laws are among the zaniest.
Consider the trend to tax prepared food (like that purchased at a restaurant) and exempt unprepared foods or ingredients (like the milk and eggs in your grocery cart). It seems straightforward at first glance but the closer you look, the zanier it gets.
In today’s world, as a recent NPR story notes, “more and more foods are straddling the line between prepared and unprepared, taxable and exempt.” If that poses few problems for consumers, it is creating a bona fide headache for the people behind tax codes. Take the take-n-bake pizza problem.
The take-n-bake pizza problem
Last year, Wisconsin attorney Mike Herald was asked by a Papa Murphy’s franchise owner if take-n-bake pizzas were taxable in Wisconsin. He didn’t know so he asked around, even calling the Wisconsin Department of Revenue. There was no consensus on whether take-n-bake pizzas were prepared foods (taxable), or unprepared foods, (exempt).
Wisconsin is a Streamline Sales Tax (SST) state, meaning it has adopted sales tax simplification measures created by the Streamline Sales Tax Governing Board (SSTGB) and designed to “simplify and modernize sales and use tax administration.” As a result, the take-n-bake pizza problem was posed to the Streamline Sales Tax Governing Board, which turned the matter over to the Compliance Review and Interpretations Committee (CRIC).
The committee opened the question up to comments and learned that the most interested parties were those with a vested interest in take-n-bake pizza: business owners and avid consumers. After deliberation, the committee recommended in a 6-1 vote that take-n-bake pizzas “as specifically described in this request meet the definition of ‘prepared food.’” Under the SST agreement, prepared foods are subject to sales tax.
The committee based its recommendation on several key points, including:
- “There is no exclusion from the definition of prepared foods for additional preparation required by the purchaser.”
- “The take and bake pizza does not require cooking per the food code since it contains no egg or raw meat or seafood.”
Yet during a December Executive Committee meeting, SSTGB executive director Craig Johnson asked the board “to possibly hold off on voting on that CRIC interpretation” until work could be done on a “possible toggle to the ‘prepared food’ definition.” Perhaps because while take-n-bake pizza could be consumed as is, few would choose to eat a raw one.
It was agreed that the vote would be tabled until the spring meeting, which takes place this week, May 13-14, 2014.
Our not-so-simple food
The growing complexity of our food compounds the complexity of the food-tax problem. According to Kirk Stark, professor of law at the University of California Los Angeles, “In some ways the line they
It may be that by tabling the take-n-bake pizza issue for further study, the Streamlined Sales Tax Governing Board is attempting to avoid one zany and incomprehensible distinction. We’ll find out soon if they succeed.
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