The Essential / Non-Essential Malfunction – Wacky Tax Wednesday

The Essential / Non-Essential Malfunction – Wacky Tax Wednesday

Some states subject non-essential items to sales tax while exempting items considered essential. For example, food purchased to be prepared and consumed at home is generally either exempt from sales tax or taxed at a reduced rate, while food sold in restaurants is generally taxed at the regular rate. This practice grew out of the belief that non-essential items are usually purchased by people with enough discretionary income to afford the tax. Remember that most states implemented sales tax in the wake of the Great Depression, when many people struggled to purchase bare essentials.

As time went on, states altered old sales tax laws and added new ones. What began as a relatively simple system has grown into an intricate, almost Gordian tangle of laws that requires an expert to unravel. Sales tax has come a long way from “essential” or “non-essential.” Nonetheless, the concept remains and leads to some pretty wacky interpretations, demonstrated in the examples below.

I can see clearly now

Like prescription glasses, corrective contact lenses are “essential” and are therefore exempt from sales tax in many states, including Pennsylvania, New Jersey and New York. Wetting solution used to store contact lenses is also exempt. On the other hand, contact lenses cleaning solution is subject to sales tax, as are non-prescription reading glasses.

As a person who has worn dirty contact lenses and suffered the consequences, I question the non-essential nature of cleaning solution. Ditto for the reading glasses, as I depend on them to see the words I am writing.

Hold out your hands

In Colorado, “sales and purchases of nonessential food items and packaging provided with purchased food and beverage items are taxable at the state sales and use tax rate of 2.9%.” An article or container is considered nonessential “if it is primarily used for the convenience of the consumer and is not necessary to effectuate the sale of food.”

When this law first took effect in 2010, drink lids were considered nonessential. Thankfully, cups were essential (the alternative being “Tilt your head back and open your mouth….”). After an uproar and perhaps one too many spilled drinks at the Colorado Department of Revenue, lids were deemed essential, too.

Still nonessential—and taxable—are grocery bags and bags for bulk grocery produce or bread. I confess it may not be essential for me to put a dozen apples in a separate sack or to bag my milk, yogurt, eggs, vegetables, fruits and beverages, but it sure is convenient for the non-jugglers among us.

My favorite essential/nonessential malfunction is the fact that in Colorado, “a carryout container used by a consumer to carry leftover meals from the restaurant is not essential” and is therefore subject to sales tax. I know what they’re going for: leftovers don't "effectuate the sale" of a meal purchased to consume on premises. Still, I challenge the tax authorities to get their leftover soup home without a container.

Share your wacky tax tales in the comments below.

photo credit: kire via photopin cc

Recent posts
Vermont modernizes communications taxes
Will Washington be the next state to implement a retail delivery fee?
What makes filing a personal property tax return so complicated?
2023 Tax Changes blue report with orange background

Avalara Tax Changes 2024: Get your copy now

Stay ahead of 2024’s biggest tax changes with this comprehensive, compelling report covering seven industries.

Read the report

Stay up to date

Sign up for our free newsletter and stay up to date with the latest tax news.