While most people are aware of how their state law applies to them in various situations they’re likely to encounter in their everyday lives, these laws have to be built to accommodate all eventualities. This can lead to some strange interpretations and applications of statutes, as well as some interesting stand-alone policies. Some of these reflect the interests of special groups, but many are just the result of a common-sense idea that was extended to an absurd degree.
Groceries vs Prepared Foods
One source of confusion for states involves determining exactly what the difference is between groceries and prepared foods. This distinction is important because, in general, prepared foods are subject to sales tax while groceries are not. Many states rely on the broad outline that hot food and any food intended to be eaten on the premises are prepared, and anything intended to be consumed at home is a grocery item.
This may seem straightforward, but is has caused confusion in both New York as it relates to bagel shops, and in Texas when it comes to the taxability of items sold in a bakery. Both of these establishments sell goods that they bake on the premises, and they often have a seating area where customers can eat. However, they also sell items that would not be taxed if purchased in a grocery store and taken home.
In New York, this has come to mean that if you purchase an unaltered bagel from a bagel shop, you won’t pay tax on it. If anyone working there does so much as slice the bagel in half for you, though, it is considered a prepared food and so subject to New York sales tax, regardless of where you plan on eating it and what else you are going to put on it at home.
A similar situation was recently clarified in Texas, where items sold in a bakery that consisted of two or more ingredients combined, or that were heated and served with eating utensils, were considered taxable, while those same bakery items sold without heating or utensils were not.
The new law that went into effect in 2017 exempts all items sold in a bakery, regardless of whether they are heated or sold with an eating utensil. It does leave the door open to confusion, however, because it does not exempt bakery goods sold at another type of retail establishment that are heated and served with eating utensils.
What’s Part of the Sale Price?
Another common complication when determining what sales tax should apply to involves figuring out exactly what is part of the sales price and what isn’t. This problem is most commonly encountered in relation to the addition of shipping and handling charges, and different states can take widely divergent views of the issue.
For instance, in Missouri, Illinois and Florida, shipping is taxable if it’s an unavoidable part of the sale. In other words, if the sale could not be completed without the shipping and there is no way for the customer to avoid the charge, it’s taxable. If shipping is optional, however, it’s not taxable. That may mean that the customer is able to pick up the item in order to avoid the shipping charge, or that there is a free shipping option available.
Other states rely on the shipping method used to determine if the shipping charges should be taxed. Alabama, for example, taxes shipping charges if the delivery is made in a vehicle owned or operated by the seller, but not if the delivery is through a common carrier. Nebraska takes this a step farther and taxes all shipping unless it’s through the US Postal Service.
In New Mexico and Arkansas, shipping is always taxable unless the buyer pays the carrier directly without going through the seller, and in Arizona and several other states, freight charges are not taxable, but handling charges are. That means that if these items are listed separately on the invoice or receipt, tax should only apply to the handling charges. If shipping and handling are lumped together, however, the tax must be applied to both.
Wild Animals Abound
Wild and farm animals both figure into some bizarre state laws as well. For instance, Arizona prohibits donkeys from sleeping in bathtubs, and South Carolina law stipulates that horses can’t be kept in bathtubs. Arizona also requires anyone interested in feeding garbage to a pig to first acquire a permit, and to renew that permit every year.
Additionally, it’s said that if you tie your elephant to a parking meter in Florida, you’ll have to pay the parking fee just as you would if you had parked a car in that spot. (The validity of this is debated.) However, elephants can’t be used to plow cotton fields in North Carolina, and camels are barred from the highway in Nevada.
Anyone looking to sell pickles in Connecticut needs to be aware of that state’s specific regulation concerning what can be called a pickle. Among other things, if it doesn’t bounce, it’s not a pickle. And it’s illegal to sleep on a refrigerator outdoors in Pennsylvania, which is something to keep in mind if you’re ever in a situation where that’s an option.
Pennsylvania also has an especially high tax on alcoholic beverages. The state rate of 18% was put in place in 1936 to help pay for repairs to the city of Johnstown, which had recently been devastated by flooding. Those repairs were completed in 1942, but the tax has remained in place to this day.
Due to the complex nature of sales tax and other types of state laws, it’s inevitable that some confusing and even ridiculous situations would result. And because it’s often hard to get these laws off the books once they’ve been adopted, they’re likely to hang around for a long time, even though the original impetus for them may have long since become obsolete.