| October 1, 2019 -- Did you ever hear the expression ‘Unintended Consequences’? Well that seems to have occurred with the expansion of the taxes on prepared foods. The intent of the bill was to increase the tax on certain prepared foods from 6.35% to 7.35% and was only to increase the tax on restaurant items that were already being taxed. Somehow in interpreting of the bill the Department of Revenue Services (DRS) felt that the language of the bill significantly broadened the base of what meals and beverages would be now be taxed.
The increased tax was described in the budget at a 1 percent surcharge on restaurant foods or on prepared meals. Apparently, the words ‘grocery stores’ was added to the bill as to where prepared foods could be found. This wording expanded the field of foods to include premade grinders and sandwiches found in convenience stores or supermarkets which would now be taxed at the 7.35% rate. Also included would be the drinks, chips, single popsicles and other frozen treats, pizza by the slice, packaged salads and even single muffins that you buy.
When the guidelines were released by DRS, it set off a wide spreading public outcry and shocked the legislators as well as the Governor. The Governor stated that the intentions of the bill were to increase the existing tax on previously prepared foods and not to expand the items not previously taxed.
This ‘unintended consequence’ set off a firestorm from legislators from both sides opposing the expanded tax and calling on the Governor to right it by calling for a special session to adjust the bill. The Governor responded by directing his budget office and the state tax department to scale back the tax. This tax is set to begin on October 1st so it is not giving businesses much time to adjust register programs to charge the proper tax rates. With the possible pull back of the tax, this leaves the businesses hanging a bit. Hopefully by the time you read this the Governor and DRS will have redefined this tax base.
It is surprising what a couple of misplaced words can do. Remember that when writing your resolutions.
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