Unscrambling the many ways Virginia taxes eggs – Wacky Tax Wednesday

How many ways are there to tax an egg? In Virginia, there are several. Let’s take a closer look — just in time for Easter.

A trio of taxes

Virginia levies a special tax on shell eggs and egg products. In fact, Virginia imposes “several different taxes” on egg producers: an egg excise tax, a retail sales and use tax, and a litter tax:

• Eggs sold as “food purchased for home consumption” (such as the 18 white eggs I recently purchased for the family to dye this weekend) are considered a staple grocery food item and are subject to Virginia’s retail sales and use tax. However, instead of the normal Virginia rate, food for home consumption is taxed at a reduced rate of 2.5 (1.5 percent state tax plus 1 percent local tax).

• A $10 litter tax is imposed annually on distributors, manufacturers, retailers, and wholesalers of certain products in Virginia, including food for human consumption. Virginia also imposes an annual $15 litter tax on distributors, manufacturers, retailers, and wholesalers of beer, carbonated water, groceries, and soft drinks. People who trade in eggs are generally subject to a combined $25 litter tax annually, although there are some exceptions to this rule.

• An egg excise tax is imposed at a rate of 5 cents per 30-dozen eggs (or 11 cents per 100 pounds of liquid eggs) on the “handler” of shell eggs and egg products sold or consumed in Virginia. Every person who handles eggs used in Virginia is required to register as an egg handler. This could be an egg distributor, huckster, or packer, or “any person who purchases, sells, or handles eggs that are used at the wholesale level for consumption in Virginia.” It could also be “any person in Virginia who purchases eggs from anyone other than a registered handler for use or consumption at wholesale in Virginia.”

Since it’s common for an egg to be handled by more than one person during its (hopefully brief) journey from hen to table, the tax is generally collected and remitted by “the last handler” – the person who “uses” the egg last. According to the Tax Commissioner, an egg is “used in Virginia” if, through incorporation into another product, it loses its character as an egg.

Eggs sold “between registered handlers” are exempt from the egg excise tax (Virginia Tax Form EG-1).

How many taxes apply to an Easter egg?

Which brings me back to Easter. Which of the above taxes apply to “Easter” eggs, hard-boiled eggs, or any other egg that maintains its character as an egg?

The answer depends in part on the seller and the container used to house the eggs. In 2011, the Virginia Legislature enacted HB 1942, which exempts eggs from the sales and use tax when sold in farmers markets and at roadside stands, provided the annual income from such sales does not exceed $1,000. To qualify for the exemption, a producer must sell no more than 150 dozen eggs per week, produced by his or her own hens; alternatively, the producer can purchase a maximum of 60 dozen eggs per week for sale. Egg sales that are exempt from the retail sales and use tax are also exempt from the litter tax, so long as “any container provided by the individual to hold purchased items has been previously used.” Virginia Tax Bulletin 11-7 contains additional information. If a new container is used, the litter tax must be applied.

The egg excise tax does not apply to eggs sold for home consumption.

Let’s not stop at eggs

Eggs aren’t the only product to make Virginia’s list of “Miscellaneous Taxes.” There are special taxes for corn, cotton, forest products, and even sheep. If that’s not wacky, I don’t know what is.

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