Column: Is the state’s new tax on bread a half-baked idea?
Published 12:00 am Monday, January 7, 2002
During the past week, a great deal of concern has risen over a change in the tax status of baked breads.
Monday, January 07, 2002
During the past week, a great deal of concern has risen over a change in the tax status of baked breads. To many of us, this change initially makes little sense – why is a local bakery now burdened by sales taxes while bread shipped in from counties or states away is not? And why has the state chosen to suddenly begin taxing this food group?
Under-standably, the issue is confusing. Citizens can be assured, however, that the purpose of this new law was not to increase taxes on businesses. This change is the result of a multi-state effort to bring uniformity and simplicity to state sales tax laws – an effort that was requested by frustrated retailers, who have grown tired of complicated tax laws that change from state to state.
Minnesota is one of 39 states participating in the Streamlined Sales Tax Project (SSTP). The purpose of SSTP is to simplify the sales and use tax system in hopes that a more universal system will make taxation simpler for business owners and will ultimately increase retailer compliance. In 2000, the legislature approved Minnesota’s involvement in the SSTP. Since that time, our state has been actively involved in drafting the SSTP’s participation guidelines, and has eventually – as a member of the program – implemented new policies recommended by the involved states.
As part of the SSTP, Minnesota has redefined taxable prepared food items. Previously, Minnesota law determined tax status based on: 1.) Was food sold on or off the premises? 2.) Was food sold for immediate consumption? and 3.) What was a single serving as opposed to a bulk serving? This system proved to be complicated, and sometimes unfair for Minnesota’s business owners.
In an effort to help retailers more easily determine an item’s tax status, as of Jan. 1, 2002, Minnesota now defines taxable prepared food as: 1.) Food sold in a heated state or heated by the seller (like rotisserie chicken or deli hot dishes); 2.) Two or more ingredients mixed or combined by the seller for sale as a single item (including baked goods, jello salads and fresh cole slaw); or 3.) Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins or straws (such as boxed deli lunches or hot dogs from a vendor).
Bread and bakery items made by the seller are taxed under point number 2. The Department of Revenue points out that some of these products may have already been taxed at some locations, depending on the previous criteria mentioned above.
While the Department of Revenue believes the new tax code is simpler and more fair, they do admit that some disparities and strange phenomena still occur. However, as long as food receives some form of tax exemptions, the department says, these frustrations will exist.
The Minnesota Grocers Association, on the other hand, opposes the change in tax code, which they believe will cause our state’s bakeries and grocery stores to suffer. The association promises a top goal this session will be working to repeal this new tax on store–baked goods.
To find more information on Minnesota’s food taxation guidelines, please log on to the Department of Revenue,s web site at www.taxes.state. mn.us. Once at this Web site, select the revised sales tax fact sheet, located under &uot;What’s Hot.&uot; Once you link to that page, click on prepared food for detailed information on our new tax criteria. If you do not have access to the Internet, please call the department at 1(800) 657-3777, or my office at (651) 296-3432.
Sen. Grace Schwab (R-Albert Lea) represents Freeborn and Mower Counties in the Minnesota Senate.