A group of Massachusetts doctors who call themselves the “White Coats” recently launched a campaign in support of a bill to start taxing soft drinks and candy at the state sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rate. From the article linked above:
The “White Coats” launched a statewide campaign Thursday morning in support of a bill sponsored by Rep. Kay Khan (D-Newton) to remove sugared drinks and candy from the list of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. -exempt “food products” under state law.
Of course, there is no master “list” of food products that are exempt from sales taxes. Instead, there are just a slew of hard-to-define categories that products fall under. Many states set different tax rates for food intended for “off-premise consumption” or “for immediate consumption;” others single out candy and soft drinks to be excluded from the exemption list. These categories often do not get thoroughly defined until the state is forced to issue a ruling on their tax treatment. These definitions are so arbitrary that I once spent several days trying to calculate the taxes owed on just six items!
In Massachusetts, additional rulings will likely be necessary, as there is not even a definition of candy or soft drinks given in the section of Massachusetts General Law that the bill would amend. The bill itself consists of just two short paragraphs.
However, even if the bill gave a more specific definition of candy and soft drinks, this is unlikely to solve the complexity problem. In states that do define candy and soft drinks, their definitions often omit products that we would colloquially consider to be candy (difficult items include KitKat®, Twix®, and Milky Way Midnight®) or they inadvertently tax products that we would probably consider juice.
Singling out specific products for different tax treatment is a compliance burden on grocers and consumers. Taxing all final sales equally and reducing rates overall could avoid these issues.
For an in-depth look at definitional problems related to Sugar and Snack Taxes, and to see if your state taxes candy and soda differently, click here.
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