Pardoned turkeys give sales tax the bird

Pardoned turkeys give sales tax the bird

It’s an annual tradition for the president of the United States to pardon a turkey at Thanksgiving. Which president started the trend is up for debate, but White House history dates the first turkey clemency to 1863, when Abraham Lincoln’s son took a liking to a bird intended for Christmas dinner.

Since then, dozens of turkeys have been given a reprieve with this tradition. But is America really the land of the free fowl?

In Lincoln’s case, it’s lucky the first family was living in the White House at the time of the pardon. The former president’s home state of Illinois requires breeders who sell animals (including livestock) as pets to collect sales tax. California, New Jersey, Tennessee, and several other states have similar laws. So, the Lincolns could have been on the hook for consumer use tax since they didn’t eat the bird as intended.

Had the Lincoln turkey made it to the White House table, tax would have been a nonissue as the District of Columbia does not charge sales tax on livestock, groceries, or chef services. Groceries are subject to sales tax in 13 states, and some states, including Washington and California, add retail sales tax to home-cooked meals prepared by professional cooks. Georgia even extended that rule to chefs marketing their home-cooking services online, requiring sales tax to be charged on the transaction.

What about the Nixon and Reagan era turkeys that were sent to petting zoos? If they spent their final days on display in Louisiana, Oklahoma, or Maryland, it would cost visitors more to get a glimpse of these fortunate fowl. These states, among others, charge sales tax on admissions to certain entertainment or amusement venues, which can include zoos.

And what about Liberty and Bell, the two turkeys plucked from the “Presidential Flock,” chauffeured from Willmar, Minnesota, to Washington, D.C., and pardoned by President Biden on November 20, 2023? After their work in the nation’s capital was complete, the duo retired to the University of Minnesota’s College of Food, Agriculture and Natural Resource Sciences in St. Paul.

Unless they try to make a run for the border together. Canada is cool with Americans bringing one U.S. turkey into the country, but try and get two past customs and the duty becomes exorbitant.

As Liberty and Bell acclimate themselves to retirement, other (less fortunate) birds will be featured on Thanksgiving tables across the nation. Thousands are delivered to food banks each year.

How does all this fly from a sales tax perspective? Farms that donate turkeys to charitable institutions may owe use tax on the birds taken out of their inventory, and possibly on their feeding and care.

Furthermore, in the weeks it takes to raise and then deliver turkeys to their final destinations, a whole flock of sales tax nexus-creating scenarios could crop up. (Nexus is a connection that allows a taxing authority, like a state, to tax a business, like the farm that raised the Presidential Flock.)

For instance, the staffers who stayed with Liberty and Bell at the Willard Hotel, toured them around the Rose Garden, and drove their motorcade to the White House could be considered remote employees. Having employees in a state, even temporarily, is a nexus-triggering activity for many states.

And you don’t need a physical presence in a state to establish nexus. Producing a presidential tom could generate a spike in sales for the turkey producer, which could lead to the establishment of economic nexus. This new tax obligation can happen even if all the extra sales are exempt business-to-business transactions, for many states count exempt sales toward their economic nexus threshold.

Having a hard time stuffing all this into your brain? We don’t blame you. Multi-state sales tax nexus is a lot to have on your plate.

While there is no tradition where state auditors grant clemency to companies for tax compliance, here are 10 tips from 4 (former) state tax auditors that could help. Thankfully, there’s Avalara sales tax automation software to make the job easier.

 

This post has been updated; it first published in November 2016.

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