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Streamlined Sales Tax and the Take-n-Bake Pizza Dilemma

 How to tax a take-n-bake pizza: SST states want to know.

The Streamlined Sales Tax Governing Board (SSTGB) grew out of a Supreme Court ruling that a state could not require a seller without a physical presence in the state to collect sales tax on sales into that state. The Court's decision was based on the fact that the existing tax system was "too complicated to impose on a business that did not have a physical presence in the state." In 2000, SSTGB was created to "find solutions for the complexity in state sales tax systems… ."

The Governing Board built the Streamlined Sales and Use Tax Agreement to "simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance." Member states work together to improve "sales and use tax administration systems for all sellers and for all types of commerce."

As stated on the Streamlined Sales Tax (SST) website, simplification centers on the following:

  • State level administration of sales and use tax collections;
  • Uniformity in the state and local tax bases;
  • Uniformity of major tax base definitions;
  • Central, electronic registration system for all member states;
  • Simplification of state and local tax rates;
  • Uniform sourcing rules for all taxable transactions;
  • Simplified administration of exemptions;
  • Simplified tax returns;
  • Simplification of tax remittances; and
  • Protection of consumer privacy.

This is no easy task. Finding consensus among the 24 states that to date have adopted the simplification measures involves a good deal of wrangling.

Product taxability

Take the third point, "Uniformity of major tax base definitions." Every state has the right to define products, and tax them, as it sees fit. For example, Texas allows an exemption for snacks it deems healthful, including breakfast bars and chips, crackers and hard pretzels. In the state of My Kitchen, however, chips and crackers are not defined as "healthful," and they may not be so defined (or exempt from sales tax) in other states.

In other words, defining product taxability can be surprisingly complex. Even water is not as easy to define or tax as you might expect. Water with vitamins is defined--and taxed--differently than water with bubbles and water from a coconut or a birch tree (yes, it's out there). Apples are subject to different tax rates when they're in a pie, covered in caramel, or pressed into cider. And let's just not delve into how candy is defined and taxed.

Since Texas is not an SST state, it can tax and exempt snacks and other items and services as it sees fit. Yet in the name of simplification, Streamline Sales Tax State members must agree on sales tax rules, regulations and policies.

Life as an SST state: the take-n-bake pizza dilemma

Wisconsin is a Streamline state, and as such, it follows SSTGB rules. Those rules sometimes need clarification. To whit, the Wisconsin Department of Revenue recently asked the Compliance Review and Interpretations Committee (CRIC) "to determine whether take-n-bake pizzas meet the definition of 'prepared food' based on the specific facts submitted."

These things take time, although the Wisconsin DOR requested expedited treatment. Public comments (from SST member states) may be submitted to the CRIC until October 7, 2013, after which a hearing on take-n-bake pizzas may be held. The taxability of take-n-bake pizzas in Wisconsin and other SST states hinges on the decision.

How are pizzas, take-n-bake or delivered, taxed in your hometown?

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photo credit: Adam Kuban via photopin cc

Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.