Thursday, January 10, 2008

Taxing the Air

I'm lucky that one of my customers is a sale tax auditor for the state. I can ask him all the complex questions about taxes without the hassle of actually contacting the board of equalization. My latest questions were about sales tax on snacks. In the last store, everything came out of a vending machine, and all vending sales are taxed. Not only were all the state and local governments getting a cut of all those snack purchases, but the city had a special tax as well.Walnut Creek taxes vending machines as employees when you pay for your business license. The new store has everything on display or in a cooler, so it's much more complicated.

When it comes to drinks, the state makes a differentiation between food and well, non-food products. The main way to tell the difference between whether you're drinking food or something else is the bubbles. Anything with carbonation is not food. Water is food, but add CO2 to make sparkling water and you've got an exotic, taxable product. The exception is sparkling juices that are pure juice; they're still food. Too many additives and you've ventured away from the food realm. So teas, coffees, water, un-carbonated or pure juice, and chocolate milk are all food and aren't taxable.

Edible food (not to be confused with drinkable food) of any sort is not taxable, regardless of sugar content. The state used to tax sugary foods, but there was an uproar and the law was changed. You would think with the problems with our budget and obesity, taxing junk food would be back on the table. The exception to no taxes on food is hot food. Hot food is taxable. How hot though? If I sell you a cold Pop Tart, it's not taxable. If I sell you a Pop Tart and my store microwave is accessible to you, it's considered potentially hot food and is taxable. Therefore, my microwave is safely kept in the tax free environment right inside my office, two steps away from taxation.

Oh yeah, and on the plus side, I learned that all the sales tax I've paid at stores that don't accept my re-sellers permit can be deducted from the sales taxes I've collected. I dug up all my receipts and it looks like I'm saving about $150. That should pay for another car load of Mexican Coke, my task for this afternoon.


  1. Only thing I can say, and boy is it nitpicky, is that if you are contacting the Franchise Tax Board about your State Board of Equalization questions, you're already f**-ed up beyond all recognition.

    Or to say it in acronyms:
    If your ?s 4 SBE R going to FTB, U R already FUBAR.