Taxing the 12 days of Christmas – Wacky Tax Wednesday
- Sales and Use Tax
- January 4, 2017 | Gail Cole
The 12 days of Christmas kicked off on December 25 and will wrap up tomorrow. While traditionally the 12 days were spent celebrating saints, many of us know them best as a time to amass unusual gifts. Who hasn’t sung along with that tongue-twister of a carol, belting out “five gold rings” with glee?
For the past three decades, PNC Financial Services Group, Inc. has published an annual Christmas Price Index that shows the current cost of each of the whimsical gifts featured in the classic carol. This year the true cost (the cumulative cost of all the gifts when counting each repetition in the song) of Christmas is $156,507.88, up 0.7% over last year. It’s a fun read.
I’m putting a tax twist on the idea. So in the spirit of shamelessly drawing out the holiday season, I ask your indulgence and give you some of the tax implications of the 12 days of Christmas.
1 partridge in a pear tree
While partridges are sometimes purchased to be part of a backyard flock, they're more commonly hunted and consumed. This may or may not be what “my true love” had in mind. In any case, hunters can flock to states with Second Amendment sales tax holidays (Louisiana and Mississippi) to stock up on necessary hunting supplies, tax-free.
The pear tree is tangible personal property, and therefore generally subject to tax in 45 states and the District of Columbia. Yet if you buy enough to start an orchard and sell the fruit, they may be eligible for an agricultural exemption from sales and use tax. In California, for example, “tax does not apply to sales of … non-annual plants, the products of which ordinarily constitute food for human consumption … including fruit trees” (Regulation 1588).
Fun fact: Three states have towns named Partridge: Kansas, Kentucky, and Illinois.
2 turtle doves
Perhaps best known for being Noah’s scout after the great flood, the turtle dove is a gentle creature that mates for life and has become a symbol of enduring love.
There aren’t too many places to purchase turtle doves in the United States, but they are available at Strombergs Chicks & Game Birds Unlimited. While tax is collected on sales to Minnesota residents, residents of other states can purchase a pair of the love doves for $130, tax free.
3 French hens
The price of three French hens has risen dramatically since 2008, when they could be purchased for less than $40. In 2016, they cost $181.50. Since both demand and supply for these hens are steady, they shouldn’t be too hard to procure.
Rumor has it that James Bond preferred their chocolate brown eggs, so let’s source our hens from the United Kingdom. The Chicken Vet (home of healthy chickens) collects U.K. value added tax (VAT) on all orders delivered to destinations in EU member. It doesn’t apply VAT to orders shipped outside of the EU, but import duties and local taxes may apply and are the customer’s responsibility.
4 calling birds
It would cost “my true love” almost $600 to purchase four calling birds, or “colly” birds, on Day 4 this holiday. A more economical gift would be the Waterford Crystal Holiday Heirlooms 4 calling birds Christmas ornament. Beautiful, and a bargain on eBay at $142.49. The seller is in Maryland and is likely obligated to collect Maryland sales tax on purchases shipped to destinations in the Old Line State. Sales tax in other states may also apply. See 3 things you need to know about eBay and sales tax for more information.
5 gold rings
There is good reason to believe that the five gold rings are actually ring-necked pheasants rather than baubles. These days, however, a true love worth any salt would proffer the kind of rings that go on fingers. PNW prices them at $750.
Gold rings are tangible personal property (TPP) and subject to sales tax in 45 states and Washington D.C. If “my true love” has a jeweler’s bench in the garage, s/he can now purchase investment bullion exempt from sales tax in Ohio and make the rings. Unfortunately, once TPP, the bullion-turn-rings would be subject to Ohio use tax.
Like many of the other fowl on the list, geese purchased for food production qualify for an agricultural exemption in many states. They’re always exempt from Texas sales and use tax — an exemption certificate isn’t required — provided they’re purchased for use exclusively on a farm or ranch. Farm animal feed is also exempt in Texas, which undoubtedly helps to fatten those geese. However, home or community gardens don’t qualify as a farm or ranch, so tax would generally apply to the sale of geese purchased to peck about the backyard and lay eggs.
Interestingly, the Texas Comptroller requires an exemption certificate for feed for “animals raised for human consumption … that are sold in the regular course of business, but that can also be kept as pets.” It gives “rabbits” as an example, but the same could hold true for geese deemed too dear to consume.
How many fowl does the average person need? According to PNW, swans are the “most unpredictable gift of the bunch,” and it would cost $13,125 to procure 7 swans fit enough to swim. Even true love has its limits.
It’s illegal to hunt the trumpeter swan, but tundra swans are fair game in some parts of the country. In North Dakota, fees charged by shooting preserves and hunting clubs for the privilege of hunting in designated areas are nontaxable. However, charges for lodging, meals, and sales of tangible personal property are taxable; and if taxable and nontaxable charges are combined, the entire amount is subject to sales tax. Keep the charges separate to keep them exempt.
Regrettably, the seven swans probably won’t swim after being shot.
The eight milking maids could be independent contractors, or they could be employees of a dairy farm. In West Virginia, “services provided by an employee to his or her employer that are within the scope of the employment contract are exempt from sales tax. Services provided by an employee to his [her] employer that are outside of the employment contract and services provided by an ‘independent contractor’ are taxable.”
However, “purchases of taxable services for use or consumption in the commercial production of an agricultural product … are exempt from sales tax.”
9 dancing ladies – 12 drummers drumming
The remaining gifts are all services. Most services (but not all) are subject to sales tax in Hawaii, New Mexico, South Dakota and West Virginia. Colorado, Illinois, Massachusetts, Nevada and Virginia tax very few services, and there’s no general sales tax in Alaska, Delaware, New Hampshire, Montana, and Oregon.
While it’s possible to hire dancers and musicians, today the most common way to experience dancing ladies, leaping lords, piping pipers and drumming drummers is to go to the symphony or theater or similar venue. It’s easy to imagine “my true love” gifting some spectacular nights out on the town.
Many admission charges to places of amusement and entertainment are subject to tax in many states, including Florida and Nevada. However, there are almost always exceptions to the rule. For example, Florida allows an exemption for admissions to live theater, live opera, or live ballet.
Admissions taxes can occur at the local level, too. Chicago imposes a 9% amusement tax on entertainment or recreational activities, including concerts. It provides a lower rate of 5% for “certain live theatrical, musical, and other live cultural performances held in an auditorium, theater, or other space whose maximum capacity (including balconies) is more than 750 persons.” And New York taxes many admissions charges but allows an exception for “live, dramatic, choreographic, or musical arts performances.” There’s been an ongoing legal battle in New York over whether or not lap dancing and the other dancing performed at strip clubs qualifies for the exception. To date, the New York Department of Taxation and Finance has successfully argued that it does not.
Sales tax is complex whether it applies to the 12 days of Christmas or the ordinary course of business. Tax automation software simplifies it for businesses of all sizes, in all states.