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The Irish Supreme Court has ruled that the bread used to make Subway sandwiches cannot be defined as bread.

The ruling was the result of a tax case. Bookfinders Ltd, a Subway franchisee, claimed that it should be exempt from value-added tax (VAT) since many products it sells are considered “staple foods.”

In the U.S., we often think of a VAT as equivalent to a national sales tax. They do have some quirky similarities, but they are not precisely the same thing. A national sales tax is a tax typically tacked onto the end of a sale of goods or services, much like state and local sales taxes. A value-added tax is a consumption tax but, unlike a sales tax, it’s collected at every stage along the production chain. In the end, the total tax is the same, but it’s from different sources. (If that seems complicated, it’s actually part of the charm since spreading the collection of tax out over a number of sources has the potential to reduce fraud – which means more taxes collected, less tax gap.)

In the Subway case, the franchisee sued the taxing authorities for a refund of VAT paid over two years (2004 and 2005). The VAT rate they paid was 9.2%, but the franchisee claimed that it should have been 0%. The argument focused on, among other things, the bread used to make their most popular item: sandwiches. Subway claimed that the bread made the sandwiches exempt, but the court, instead, found it to be taxable.

The Supreme Court was the fourth appellate body to hear the matter, agreeing in 2019 to hear it. The case largely focused on statutory interpretation, which legal and tax geeks will love reading. But ultimately, the matter came down to what the court described as “a complicated definition of an everyday product” or, put more simply: what is bread?

Ireland’s Value-Added Tax Act of 1972 sets definitions and tax rates for various products, including bread. To be exempt under the Act, the bread must meet the requirement that “fat, sugar and bread improver, subject to the limitation that the weight of any ingredient specified in this subclause shall not exceed 2 per cent of the weight of flour included in the dough.” The sugar content in Subway’s bread options is about 10% of the total weight.

According to Justice Donal O’Donnell, the intention of Act was to make a distinction between bread as a staple food, “and other baked goods made from dough, which are, or approach, confectionery or fancy baked goods.” Is it more like a breakfast roll or a brownie?

Why would you add sugar to bread? For one, it can supercharge the yeast and cause the dough to rise more quickly. But, as likely applies here, when you add sugar to dough, the sugar locks in moisture so that the bread doesn’t dry out. That’s why your muffins – and your Subway rolls – are springy, while a baguette (which typically eschews sugar and consists only of flour, water, salt, and yeast) is more crusty.

Ultimately, the court seemed to think many of the characterizations offered by Bookbinders to argue in favor of the 0% rate were a stretch. In response, Justice O’Donnell, wrote, “This seems a very cumbersome and unnatural description of a hot meatball sandwich. Arguments like this induce some sympathy for the beleaguered draftspersons and for the tortured language to which they sometimes have to resort in order to carry into effect a reasonable statutory policy.” And with that, he dismissed the appeal.

You can read the entire opinion here.

If all of this sounds vaguely familiar, you have a great memory. In 2008, a court in London ruled that Pringles were not potato chips. The taxing authorities claimed that Pringles fell under an exception for potato chips, sticks or puffs and “similar products made from the potato, or from potato flour, or from potato starch.” But Procter & GamblePG, Pringles parent company, claimed that Pringles are not made like potato chips since they are cooked from baked dough and not slices of potato (Pringles are just 42% potato).

Back-to-school may look different in 2020, but that doesn’t mean that parents and teachers won’t be shopping. According to the National Retail Federation, consumers could spend a record amount in 2020 to prepare students for school and college as they buy more laptops and computer accessories for online and hybrid schools. 

“By any measure, this is an unprecedented year with great uncertainty, including how students will get their education this fall whether they are in kindergarten or college,” NRF President and CEO Matthew Shay said. “Most parents don’t know whether their children will be sitting in a classroom or in front of a computer in the dining room, or a combination of the two. But they do know the value of an education and are navigating uncertainty and unknowns so that students are prepared.”

According to the NRF survey, parents with children in elementary school through high school say they plan to spend an average of $789.49 per family, topping the previous record of $696.70. College students and their families expect to pay an average of $1,059.20 per family, more than last year’s record of $976.78. Total spending for K-12 and college combined is projected to reach $101.6 billion, topping last year’s $80.7 billion and exceeding the $100 billion mark.

Not surprisingly, many shoppers plan to buy online – and top of the list? Computers and other electronics. 

With those expenses looming, parents are often looking for opportunities to save some cash. One of the ways that they do it? Sales tax holidays.

Here’s a look at states offering taxpayers a break on sales tax for back-to-school items this year:

  • Connecticut (August 16-22) Exemptions apply to purchases of clothing and footwear ($100 or less per item), excluding clothing accessories, protective or athletic clothing, and some shoes including ballet, bicycle, bowling, cleats, football, golf, track, jazz, tap, and turf (but note that aerobic, basketball, boat and running shoes are exempt).
  • Florida (August 7-9) Exemptions include clothing, shoes, wallets, handbags, and backpacks that cost $60 or less. Computers that cost less than $1,000 and school supplies, such as pens, pencils, binders, and lunch boxes that cost less than $15 are also included.
  • Iowa (August 7-8) Exemptions apply to purchases of clothing or footwear (up to $100 per item); for any item that costs $100 or more, sales tax applies to the entire price.
  • Maryland (August 9-15) Exemptions apply to purchases of clothing and footwear ($100 or less per item), including sweaters, shirts, slacks, jeans, dresses, robes, underwear, belts, shoes, and boots priced at $100 or less. Accessories, including jewelry, watches, watchbands, handbags, handkerchiefs, umbrellas, scarves, ties, headbands and belt buckles will remain taxable, as will special clothing or footwear designed primarily for protective use (and not for normal wear) such as football pads.
  • Massachusetts(August 28-29) Retail items of up to $2,500, purchased in Massachusetts for personal use on these two days, will be exempt from sales tax (exceptions apply).
  • Mississippi (July 26-27). Exemptions apply to purchases of clothing and footwear ($100 or less per item regardless of how many items are sold at the same time); accessory items such as jewelry, handbags, wallets, watches, backpacks and similar items are not included. Footwear does not include cleats and items worn in conjunction with an athletic or recreational activity.
  • Missouri (August 7-9) Exemptions apply to purchases of clothing ($100 or less per item), school supplies ($50 or less per purchase), computer software ($350 or less), personal computers or computer peripheral devices ($1,500 or less) and graphing calculators ($150 or less). Some cities have opted not to participate (check the website for specifics), although, in those circumstances, the state’s portion of the tax rate will remain exempt.
  • New Mexico (August 7-9) Exemptions apply to purchases of footwear and clothing, excluding accessories ($100 or less per item); school supplies ($30 or less per item); computers ($1,000 or less per item); computer peripherals ($500 or less per item); and book bags and backpacks ($100 or less per item).
  • Ohio (August 7-9) Exemptions apply to purchases of clothing ($75 or less per item). Note that the exemption applies to clothing selling for $75 or less. If a piece of clothing sells for more than $75, the tax is due on the entire selling price. Exemptions also apply to school supplies ($20 or less per item) and instructional materials ($20 or less per item).
  • Oklahoma (August 7-9) Exemptions apply to purchases of clothing and footwear ($100 or less per item). The exemption does not apply to the sale of any accessories, special clothing or footwear primarily designed for athletic activity or protective use that is not usually worn except when used for athletic activity or protective use, or to the rental of clothing or footwear. Qualified items are exempt from state, city, county, and local municipality sales taxes.
  • South Carolina (August 7-9) Exemptions apply to a variety of back-to-school essentials, from clothing, accessories, and shoes to school supplies, backpacks, and computers. Shoppers will also find tax-free items for the home and dorm room.
  • Tennessee (August 7-9) The back-to-school holiday weekend has passed, but Tennessee is offering a second opportunity to save this year: During this time, the retail sale of food and drink by restaurants and limited-service restaurants, is exempt from sales tax.
  • Texas (August 7-9) The law exempts most clothing, footwear, school supplies and backpacks priced under $100 from sales and use taxes from a Texas store or from an online or catalog seller doing business in Texas.
  • Virginia (August 7-9) Exemptions apply to purchases of clothing and footwear ($100 or less per item) and school supplies ($20 or less per item). Sports or recreational items are not exempt from tax. The holiday also applies to hurricane and emergency preparedness items, and Energy Star™ and WaterSense™ products.

Looking for more information? Some states are pretty specific about the exemptions. You can find a link to each state’s sales tax holiday website by clicking on the state’s name.

**A few states, like Alabama and Arkansas, have already held their 2020 sales tax holidays. 

Keep in mind that some states have no statewide sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon), while others (like Pennsylvania and Vermont) already exempt some necessities like clothing. Also, keep in mind that some states offer counties and towns the option not to participate, so again, check with your state if you have questions.

I’ll update the list as information is made available (feel free to reach out to me with changes or updates that you notice). Happy shopping!

If you find yourself clicking over to do some online shopping more than before, you’re not alone. Web sales are up from last year in the U.S., reaching $73.2 billion as compared with $41.5 billion a year earlier. That’s true even though the U.S. gross domestic product (GDP) was down a record 33% in the second quarter, unemployment levels remain high at just over 11%, and there’s no stimulus package on the books just yet.

So why the clicks? Many Americans are choosing to shop from home as COVID-19 continues to spread. According to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, the United States has reported nearly 4.7 million cases and approximately 155,000 deaths, the highest numbers anywhere in the world.

Those clicks mean something different than they did even five years ago. That’s because of a 2018 Supreme Court case called South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc. — sometimes just referred to as Wayfair.

Under the Constitution, states must establish a connection between a taxpayer and the state to impose taxes: that’s referred to as nexus. For years, the rule was that only those companies with a physical presence inside a state can be required to collect sales tax, “continuing value of a bright-line rule in this area.” For brick and mortar stores, that’s pretty easy: Are you physically located in the state or not?

The idea that you could only impose sales tax on sales where a retailer maintained a physical presence in a state had previously been established in National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 and was affirmed in Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992). But the advent and growth of internet sales complicated the issue: When Quill was decided, fewer than 2% of Americans had access to the internet.

But the advent and growth of internet sales have complicated the issue. As states become increasingly aware of the amount of revenue they’re losing, they are seeking better ways to collect. Increasingly, that means that they are demanding that retailers be responsible for figuring and remitting the tax – and the requirements may differ from state to state.

The lack of a consistent approach raised the question of whether Quill deserved a second look. That’s what the Supreme Court heard in Wayfair. In Wayfair, the Supreme Court essentially killed Quill, ruling that states have broad authority to require online retailers to collect sales taxes.

(You can read more on Wayfair here. You can read the majority opinion, together with the concurring opinions and the dissent, which downloads as a PDF, here.)

As a result of Wayfair, there have been significant changes in sales tax compliance laws for remote sellers and marketplace facilitators. States rushed to change their laws following Wayfair, and more than a dozen states tweaked their sales tax laws beginning October 1, 2019. Since Wayfair, more than 40 states have made changes to their sales tax laws.

Of the 45 states with a general sales tax, 43 have adopted an economic nexus law or rule since Wayfair. That can make tax compliance burdensome for some sellers, especially small-to-midsize businesses.

This was a concern raised in Wayfair, which caused Justice Kennedy to note:

These issues are not before the Court in the instant case; but their potential to arise in some later case cannot justify retaining this artificial, anachronistic rule that deprives States of vast revenues from major businesses.

Those words were considered a signal that Wayfair, Part II, might eventually find its way into the courts. For now, sellers are considering other options. Some are pushing for more favorable legislation.

As states watch sales tax revenues go up – as other tax revenues may take a dip – it’s may be the case that states will revisit how they view their tax systems under Wayfair. Brad Scott, the Director of Finance at Halstead Bead, Inc., a jewelry component wholesaler, hopes that states will take a second look at how sales taxes are applied across the country. 

Since May 2019, Scott has led Halstead’s Wayfair legislative advocacy efforts to achieve uniformity, simplification, clarity, and liability limitations for small businesses at both the state and federal levels. He and I recently discussed those advocacy efforts on the Taxgirl podcast (you can listen to the discussion – and find out more – here).

Why does Scott care? And why should retailers? Folks like to say that Wayfair leveled the playing field between brick and mortar stores and online retailers. It was supposed to be about fairness. But, Scott says that Wayfair has resulted in a more complicated system – one that applies as equally to a Walmart as it does to a Halstead. As Scott notes, while those compliance burdens are the same, “I don’t have the team that Walmart already has.”

The cost to comply can be considerable, chasing some retailers out of business while encouraging others to consider aligning with bigger businesses, like Amazon, to do the heavy lifting (though it’s not always that simple). And there’s collateral damage, too. Halstead had to replace its long-time accountant, properly licensed in the state where they are located, because they needed someone who could reach – and comply with laws – in all states where they did business.

What’s the solution? Almost every retailer and tax professional has their own answer for this one, but it generally has something to do with uniformity. The current system, says Scott and many retailers like him, simply isn’t working.

I know many of you have heard the controversy about Wayfair and Amazon paying taxes. This week’s episode dives into the recent Supreme Court ruling that online businesses must pay taxes and the effect on smaller, primarily online businesses.

About Brad Scott and Wayfair Advocacy

Brad Scott joins Kelly as a guest to give an inside look at how the Kill Quill ruling affects small businesses. Brad is the Director of Finance at Halstead Bead, Inc., a jewelry component wholesaler supplying jewelers across the United States and around the globe. Halstead is a second-generation, family-owned, small business. Scott has been with Halstead since 2002. Since May 2019, Scott has led Halstead’s Wayfair legislative advocacy efforts to achieve uniformity, simplification, clarity, and liability limitations for small businesses at both the state and the federal level. Scott graduated from Michigan State University with a BA in Finance.

Small Businesses Complying with the Kill Quill Ruling  

As Brad and Kelly discuss the tax ruling for online retailers, they also discuss what it means for taxpayers and professionals. Many businesses, taxpayers, and online retailers may not even know if the rules apply to them, or how to comply. Brad and Kelly help listeners learn how to move towards compliance, and what can happen along the way. Along with these helpful tips, Brad and Kelly discuss if this will ruling stay in effect and how the burden and benefits can vary. The takeaway from this podcast is beneficial by hearing an insider’s experience and opinions on the matter, while also learning the expectations and what comes next.   

Listen to Kelly and Brad Scott talk Tax Rulings, as well as: 

  • Discover About Complying with The Wayfair Ruling  
  • Which Rules Apply to You? 
  • Necessary Educational Expenses to Comply 
  • Deciding on Where to do Business  
  • The Challenge of Keeping up with Changes  
  • Brad’s Hope to Uniform Taxes  
  • Does Compliance Benefit or Burden Taxpayers? 
  • It is not All About the Cost 
  • Finding Allies to Fight for Small Businesses  
  • How COVID-19 Could Change the Ruling 
  • Complexity is Causing Compliance Difficulties  
  • Taking the Next Step, Moving Forward  

About Kelly: 

Kelly Phillips Erb created and hosts the Taxgirl podcast, your home for tax news, tax info, and tax policy. In each episode, she shares conversations about taxes, money, and the choices we make. Kelly is a tax attorney who works with taxpayers and tax practitioners like you every day. She helps folks out of tax jams, and hopefully, keeps others from getting into them.

You can find out more about Kelly here and you can follow her on Twitter, Facebook, Instagram, and Linkedin.

To subscribe to the podcast (it’s free!) using Apple, Spotify, or your favorite listening app, click here.

Kelly’s Website: Taxgirl

Brad’s Family Business: Halstead Bead

National Federation of Independent Business: NFIB

American Catalog Mailers Association: ACMA

Online Merchants Guild: OMG

Streamlined Sales Tax Governing Board, Inc.: SST

It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter.

N is for Nexus.

Nexus is a legal term for a connection; it’s important in the tax world because, under the Constitution, states must establish a connection between a taxpayer and the state in order to impose taxes.

For years, the rule was that only those companies with a physical presence inside a state can be required to collect sales tax, “continuing value of a bright-line rule in this area.” With respect to brick and mortar stores, that’s pretty easy: Are you physically located in the state or not?

The idea that you could only impose sales tax on sales where a retailer maintained a physical presence in a state had previously been established in National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 and was affirmed in Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992). But the advent and growth of internet sales complicated the issue: When Quill was decided fewer than 2% of Americans had access to the internet.

But the advent and growth of internet sales have complicated the issue. As states become increasingly aware of the amount of revenue they’re losing, they are seeking better ways to collect. Increasingly, that means that they are demanding that retailers be responsible for figuring and remitting the tax – and the requirements may differ from state to state.

The lack of a consistent approach raised the question of whether Quill deserved a second look. That’s what the Supreme Court heard in South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc. — sometimes just referred to as Wayfair. In Wayfair, the Supreme Court offered an answer: States have broad authority to require online retailers to collect sales taxes.

(You can read more on Wayfair here. You can read the majority opinion, together with the concurring opinions and the dissent, which downloads as a PDF, here.)

You can find the rest of the series here:

Many states across the country typically host a “sales tax holiday,” which exempts certain items from sales tax, usually once a year. In Tennessee, the 3-day summer weekend exempted purchases of clothing ($100 or less per item), computers ($1,500 or less) and school and art supplies ($100 or less per item) in 2019. But a proposal to include feminine hygiene products during Tennessee’s sales tax holiday faces resistance from lawmakers – and I’m not making this up – concerned about the lack of a limit on those purchases.

(It’s true: Tennessee lawmakers have indeed figured out what women have been plotting for years. We have, in fact, been secretly hoping that the sales tax holiday would be extended to sanitary products solely to go on a shopping spree. It’s part of our plan to take over the world.)

The bill, H.B. 1921, was introduced in January by Rep. London Lamar (D-91), who is (gasp) a woman. The companion bill, S.B. 1724, was introduced by Sen. Sara Kyle (D-30), who is also a woman.

According to the state bill‘s fiscal note, Tennessee women spend about $120 per year on feminine hygiene products (summary downloads as a PDF). At a 7% state sales tax, that works out to $8.40 per year. Some lawmakers believe that kind of incentive might send the 1,820,292 women in Tennessee between the ages of 15 and 55 on a tampon-buying spree.

One of the state senators most concerned about the sales tax holiday? Dr. Joey Hensley (R-28). 

According to the AP, Sen. Hensley said, while debating against the bill, “I would think since it’s a sales tax holiday, there’s really no limit on the number of items anybody can purchase.” He added, “I don’t know how you would limit the number of items someone could purchase.”

Interestingly, this same concern does not seem to apply to most other items on the list of tax-exempt items during the sales tax holiday.

But then, Dr. Hensley knows a little something about women: he’s been divorced four times. During his last divorce, he was accused of having an affair with a part-time nurse in his medical office. 

If you made a purchase on the internet yesterday, you might have noticed something different: sales tax. Changes in sales tax compliance laws for remote sellers and marketplace facilitators in more than a dozen states kicked in beginning October 1, 2019. More than 40 states have tweaked their sales tax laws since a 2018 Supreme Court Ruling.

That ruling in South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc. —sometimes just referred to as Wayfair—focused on whether physical presence requirement for sales tax should stand. The idea that you could only impose sales tax on sales where a retailer maintained a physical presence in a state had previously been established in National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 and was affirmed in Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992). But the advent and growth of internet sales complicated the issue: When Quill was decided fewer than 2% of Americans had access to the internet. As states pushed to expand sales tax requirements to online sales, retailers pushed back. That led to what’s been called the “tax case of the millennium.” In Wayfair, the Supreme Court essentially killed Quill, ruling that states have broad authority to require online retailers to collect sales taxes.

(You can read more on Wayfair here. You can read the majority opinion, together with the concurring opinions and the dissent, which downloads as a PDF, here.)

Scott Peterson, vice president of U.S. Tax Policy at the tax compliance software firm, Avalara, explains that the changes affect two targets: remote sellers and marketplace facilitators. 

Remote sellers are precisely what they sound like on the tin: out-of-state sellers. As of October 1, 2019, the laws changed in seven states to require remote sellers to charge sales tax subject to specific criteria. They are:

  • Arizona: Economic nexus and law kicks in with sales only threshold of starting at $200,000 in 2019; the threshold decreases over time to $150,000 in 2020 and $100,000 in 2021 and beyond
  • Kansas: Economic nexus law kicks in with no threshold (in other words, there’s no small seller exception)
  • Massachusetts: Changes from cookie nexus to full economic nexus with a $100,000 threshold
  • Maryland: Economic nexus extended to certain tobacco taxes
  • Minnesota: Economic threshold for remote sellers changed to $100,000 or 200 transactions (used to be ten or more retail sales totaling $10 or 100 transactions)
  • Tennessee: Economic nexus threshold of $500,000 becomes effective; the optional uniform local rate of 2.25% goes away (specific local sales tax rate in effect for city or county jurisdiction into which the sale was shipped or delivered must be used)
  • Texas: Economic nexus threshold of $500,000 becomes effective; there is also an option for single local use tax rate for sales in the state (as opposed to using the rate in each sales tax jurisdiction)

Marketplace facilitators are those consolidated sites like Amazon Marketplace that make it possible for smaller retailers to reach a broad audience without the need for a separate sales platform. As of October 1, 2019, the laws changed in 14 states to require marketplace facilitators to charge sales tax, often subject to criteria. They are:

  • Arizona: Marketplace facilitator law with a threshold of $100,000
  • California: Marketplace facilitator law with a threshold of $500,000 
  • Colorado: Marketplace facilitator law with a threshold of $100,000 
  • Maine: Marketplace facilitator law with a threshold of $100,000 or 200 transactions 
  • Massachusetts: Marketplace facilitator law with a $100,000 threshold
  • Maryland: Marketplace facilitator law has no dollar threshold but requires nexus
  • Minnesota: Marketplace facilitator law with $100,000 or 200 transaction threshold
  • Nevada: Marketplace facilitator law with $100,000 or 200 transaction threshold
  • North Dakota: Marketplace facilitator law with $100,000 or 200 transaction threshold
  • Ohio: Marketplace facilitator law with $100,000 or 200 transaction threshold
  • Oklahoma: Marketplace facilitator law with $10,000 threshold (can collect or comply with use tax reporting requirements)
  • Texas: Marketplace facilitator law has no dollar threshold
  • Utah: Marketplace facilitator law with $100,000 or 200 transaction threshold
  • Wisconsin: Marketplace facilitator law with $100,000 or 200 transaction threshold

With those changes, of the 45 states that have a general sales tax, 43 have now adopted an economic nexus law or rule since Wayfair. According to Peterson, two states, Florida and Missouri, have general sales tax but no economic nexus—yet. 

These changes, which feel like they are coming at a rapid-fire pace, can be challenging for retailers. Sellers need to figure out which laws affect them, and that means accounting for sales by state (and in some states, tracking by jurisdiction). That can make tax compliance burdensome for some sellers, especially small-to-midsize businesses. This was a concern raised in Wayfair, which caused Justice Kennedy to note, “These issues are not before the Court in the instant case; but their potential to arise in some later case cannot justify retaining this artificial, anachronistic rule that deprives States of vast revenues from major businesses.” [emphasis added]

Those words were considered as a signal that Wayfair, Part II, might eventually find its way into the courts. For now, sellers are considering other options. Some are pushing for more favorable legislation. Others, according to Peterson, are getting rid of their websites and selling directly on the marketplace since those larger companies tend to be better situated to collect and remit tax. Marketplace facilitators also get a little grace from the tax authorities: While remote sellers are expected to comply immediately, all states except one with marketplace facilitator laws allow up to three years to become 100% compliant (through phase-ins). The presumption, Peterson says, is that the marketplaces aren’t going to get it right.

So how do you know if you’re getting it right? Peterson suggests that sellers reach out to their tax professionals to make sure that they’re following the rules. If you use software, make sure that it’s tracking the right kinds of sales and in the right places. Ask questions, he says. Even those as basic as “What is a transaction?” can make a difference in whether you have to collect sales tax in some states.

It’s National Ice Cream Day. And in case you think that it’s a holiday made up by scheming kids to convince parents to give them ice cream (I wouldn’t put it past mine), it’s a real holiday. Well, real-ish.

National Ice Cream Day, as well as National Ice Cream Month (I’m not kidding), are “official” holidays designated by then-President Ronald Reagan following a joint resolution from Congress. The resolution, S.J.Res.298, was signed into law on July 2, 1984. The text of the declaration is as follows:

Whereas ice cream is a nutritious and wholesome food enjoyed by over 90 per centum of the people of the United States;

Whereas the ice cream industry with approximately $3,500,000,000 in annual sales provides jobs for thousands of citizens and uses nearly 10 per centum of the milk produced by United States dairy farmers, thereby contributing substantially to the economic well- being of the Nation’s dairy industry; and

Whereas ice cream enjoys a reputation as the perfect dessert and snack food, and over eight hundred and eighty-seven million gallons of ice cream were consumed in the United States in 1983:

Now, therefore, be it Resolved by the Senate and House of Representatives of the United States of America in Congress assembled. That July 1984, is hereby proclaimed as “National Ice Cream Month”, and July 15, 1984, as “National Ice Cream Day”, and the President is authorized and requested to issue a proclamation calling upon the people of the United States to observe ice cream month and ice cream day with appropriate ceremonies and activities.

So there you have it: it’s the law that you should observe the day with “appropriate ceremonies and activities.” For most of us, that means eating a little ice cream. And boy, do we ever: according to the International Dairy Foods Association (IDFA), the average American consumes more than 23 pounds of ice cream each year. The result is an $11 billion industry that supports 26,000 direct jobs and generates $1.6 billion in direct wages. And, the IDFA found that the majority of U.S. ice cream and frozen dessert manufacturers have been in business for more than 50 years: many are still family-owned businesses.

Ice cream has long been popular in the United States. Ice cream made its debut in America even before we declared independence. President George Washington shared a love of the frozen treat, designating approximately $200 for ice cream during the summer of 1790 – adjusted for inflation, that works out to an ice cream budget of about $2,862.54 (we should all be so lucky).

Presidents Jefferson and Madison likewise enjoyed a good scoop or two of ice cream. President Jefferson’s recipe for vanilla ice cream was so important that he wrote it down. It’s now on display in the American Treasures of the Library of Congress (you can see a copy of the recipe here.)

Despite the fact that our politicians enjoyed the good stuff, ice cream was pretty much a treat for the rich until the mid-19th century when technology (like freezers and steam engines) made it more available to the masses. Nearly a hundred years later, Americans were consuming over 20 quarts of ice cream per person annually.

Ready to grab some ice cream now? Before you run out to the ice cream truck, hold onto your wallet. Whether you’ll pay sales tax on top of the price of that ice cream depends on where you live.

Five states do not have a state sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon). Most states, however, do have a sales tax on prepared foods, but the rules can be complicated.

In Arkansas, for example, ice cream purchased at an ice cream shop is likely taxable, but if purchased at a grocery store, ice cream (packaged, not made or served by the seller, including toppings and novelties) is generally eligible for a reduced sales tax rate. Similarly, in Virginia, certain types of vendors are presumed to be sellers of food for immediate consumption, including ice cream stands and trucks. In Washington, prepared foods are taxable and include foods sold with utensils provided by the seller, including yogurt or ice cream cups that are packaged with wooden or plastic spoons.

In some states, including Alabama and South Carolina, groceries are generally taxable. What’s considered a grocery item, however, can vary from state to state.

Not surprisingly, some states have more of an incentive to get you to buy. In Iowa, the 4th state in the country for ice cream production (and 12th in total pounds of milk produced), milk and milk products, including packaged ice cream products are exempt from sales tax. Similarly, Indiana, the 2nd state in the country for ice cream production, also generally exempts ice cream from sales tax.

California leads the nation in ice cream production and yes, they also generally exempt “milk and milk products, including ice cream, ice milk and ice cream and ice milk novelties, sherbets, imitation ice cream, and imitation ice milk, dried milk products, sugar of milk, milkshakes, malted milks, and any other similar type beverages composed at least in part of milk or a milk product and requiring the use of milk or a milk product in their preparation.” Another quirk? In California, tax applies to “sales of sandwiches, ice cream, and other foods sold in a form for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others.” But beware: while it includes drive-ins, a passenger’s seat aboard a train or a spectator’s spot at a game, show, or similar event is not a “chair,” and tax doesn’t apply.

Plain ol’ ice cream is the most popular category of frozen desserts: U.S. ice cream companies made more than 898 million gallons of regular ice cream in 2015. But what about mix-ins? That’s a whole other level of complication. In Wisconsin, prepared foods for immediate consumption are taxable. But ice cream used in other forms – like cake – is not considered taxable.

Sales tax rules are incredibly specific. Sometimes, all it takes is leaving the premises or adding a topping to make something go from nontaxable to taxable (and vice versa). Numerous exceptions apply – and sometimes, these exceptions, like California’s “80/80 rule” are based on a formula that is practically invisible to the consumer. But even crazy sales taxes haven’t dampened enthusiasm for ice cream lovers in this country.

When it comes to flavor, most folks prefer plain vanilla. For some inexplicable reason, the most popular flavor in my state (Pennsylvania) is brownie; those of you who know me would agree that my home state of North Carolina’s favorite flavor (coffee) makes more sense. You can find out what your state prefers here.

No matter where you live, if you’re looking to grab some ice cream today and don’t want to put a dent in your wallet, take advantage of some free offerings:

  • Baskins Robbins is offering 2 for $7.99 pre-packed quarts or 2 for $9.99 56 oz. containers. Offers may vary. See store for details.
  • Carvel is offering customers a BOGO (buy one, get one) cup or cone, any size any flavor. Offers valid on an item of equal or lesser value only. See store for details.
  • Cold Stone Creamery is celebrating by offering a FREE $10 bonus eCard* for every $30 in Cold Stone Creamery® Gift Cards – but hurry, this offer is only 7/21 and only online!
  • Cumberland Farms is celebrating by offering customers $1 off any of the brand’s Ultimate Scoop Ice Cream flavors for a price of $3.99/pint versus the regular price of $4.99/pint.  Text the word SCOOPS to 64827 to receive $1 off any pint of Ultimate Scoops at any of Cumberland Farms’ nearly 600 retail locations across the Northeast and Florida. Existing members of the text database will receive the coupon on the morning of 7/21 automatically, and the offer is redeemable through Sunday, 7/28.
  • My/Mo Mochi Ice Cream is partnering with UNIQLO for an in-store pop up in honor of National Ice Cream Day. On Sunday, July 21st, both brands will come together to deliver fashion, flavor, and fun by offering consumers free My/Mo Mochi Ice Cream at nine U.S. UNIQLO stores across New York City, Los Angeles, San Francisco, Washington D.C., Boston, Seattle, and Chicago from 11:00 A.M. to 4:00 p.m.
  • If you tweet “#SensodyneforIceCream (ice cream emoji) on July 21st you can receive same-day delivery of (1) pint of ice cream, Sensodyne Rapid Relief, soft pack cooler, and insulated tumbler to celebrate accordingly. Offer is applicable in select cities, while supplies last. Participating cities: New York City, Los Angeles, Chicago, San Francisco, and Philadelphia.
  • Not to be outdone, King Arthur encourages you to make your own, offering free shipping on some ice cream makers.

And let’s not forget about our four-legged friends! PetSmart® is offering a weekend of free, dog-friendly ice cream topped with dog biscuit treats at PetSmart PetsHotel® locations across North America on Saturday, July 20, and Sunday, July 21. Dogs can get a four-ounce, complimentary serving of dog-safe ice cream and toppings during normal business hours at PetSmart stores with PetsHotel facilities while supplies last. The frozen treats are customarily offered as an add-on treat service at Doggie Day Camp and during overnight stays.

However you celebrate the day, stay cool!

Ready for back to school shopping? According to the National Retail Federation’s annual survey conducted by Prosper Insights & Analytics, total spending for K-12 schools and college reached $82.8 billion in 2018, nearly as high as 2017’s $83.6 billion. With those expenses looming, parents are often looking for opportunities to save some cash. One of the ways that they do it? Sales tax holidays.

Here’s a look at states offering taxpayers a break on sales tax for back-to-school items this year:

  • Alabama (July 19-21) Exemptions apply to purchases of clothing ($100 or less per item), computers (single purchase up to $750), school supplies, art supplies or school instructional materials ($50 or less per item) and books ($30 or less per item). Not all counties and municipalities are participating, so check the state link for a list of participating locations.
  • Arkansas (August 3-4) Exemptions apply to purchases of clothing and footwear ($100 or less, per item), clothing accessories ($50 or less per item), school supplies, art supplies, and school supplies. All retailers are required to participate and may not charge tax on items that are legally tax-exempt during the Sales Tax Holiday.
  • Connecticut (August 18-24) Exemptions apply to purchases of clothing and footwear ($100 or less per item), excluding clothing accessories, protective or athletic clothing, and some shoes including ballet, bicycle, bowling, cleats, football, golf, track, jazz, tap and turf (but note that aerobic, basketball, boat and running shoes are exempt).
  • Florida (August 2-6) Exemptions include clothing, shoes, wallets, handbags, and backpacks that cost $60 or less. Computers that cost less than $1,000 and school supplies, such as pens, pencils, binders and lunch boxes that cost less than $15 are also included.
  • Iowa (August 2-3) Exemptions apply to purchases of clothing or footwear (up to $100 per item); for any item that costs $100 or more, sales tax applies to the entire price of that item.
  • Maryland (August 12-18) Exemptions apply to purchases of clothing and footwear ($100 or less per item), including sweaters, shirts, slacks, jeans, dresses, robes, underwear, belts, shoes and boots priced at $100 or less. Accessories, including jewelry, watches, watchbands, handbags, handkerchiefs, umbrellas, scarves, ties, headbands and belt buckles will remain taxable, as will special clothing or footwear designed primarily for protective use and not for normal wear, such as football pads.
  • Mississippi (July 26-27). Exemptions apply to purchases of clothing and footwear ($100 or less per item regardless of how many items are sold at the same time); accessory items such as jewelry, handbags, wallets, watches, backpacks and similar items are not included. Footwear does not include cleats and items worn in conjunction with an athletic or recreational activity.
  • Missouri (August 2-4) Exemptions apply to purchases of clothing ($100 or less per item), school supplies ($50 or less per purchase), computer software ($350 or less), personal computers or computer peripheral devices ($1,500 or less) and graphing calculators ($150 or less). Some cities have opted not to participate (check the website for specifics), although in those circumstances the state’s portion of the tax rate (4.225%) will remain exempt.
  • New Mexico (August 2-4) Exemptions apply to purchases of footwear and clothing, excluding accessories ($100 or less per item); school supplies ($30 or less per item); computers ($1,000 or less per item); computer peripherals ($500 or less per item); and book bags and backpacks ($100 or less per item).
  • Ohio (August 2-4) Exemptions apply to purchases of clothing ($75 or less per item). Note that the exemption applies to clothing selling for $75 or less. If an item of clothing sells for more than $75, the tax is due on the entire selling price. Exemptions also apply to school supplies ($20 or less per item) and instructional materials ($20 or less, per item).
  • Oklahoma (August 2-4) Exemptions apply to purchases of clothing and footwear ($100 or less per item). The exemption does not apply to the sale of any accessories, special clothing or footwear primarily designed for athletic activity or protective use that is not normally worn except when used for athletic activity or protective use, or to the rental of clothing or footwear. Qualified items are exempt from state, city, county, and local municipality sales taxes.
  • South Carolina (August 2-4) Exemptions apply to a variety of back-to-school essentials, from clothing, accessories, and shoes to school supplies, backpacks, and computers. Shoppers will also find tax-free items for the home and dorm room.
  • Tennessee (July 26-28) Exemptions apply to purchases of clothing ($100 or less per item), computers ($1,500 or less) and school and art supplies ($100 or less per item). Apparel that costs more than $100 remains taxable, as do items such as jewelry, handbags, or sports and recreational equipment.
  • Texas (August 9-11) The law exempts most clothing, footwear, school supplies and backpacks priced under $100 from sales and use taxes from a Texas store or from an online or catalog seller doing business in Texas.
  • Virginia (August 2-4) Exemptions apply to purchases of clothing and footwear ($100 or less per item) and school supplies ($20 or less per item). Sports or recreational items are not exempt from tax. The holiday also applies to hurricane and emergency preparedness items, and Energy Star™ and WaterSense™ products.

(A handful of states which offered a sales tax holiday in 2018 have not yet confirmed a 2019 date.)

Keep in mind that some states have no statewide sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon) while others (like Pennsylvania and Vermont) already exempt some necessities like clothing. Still, others offer special exemptions for hurricane supplies, Energy Star appliances, and other items. This list is meant to provide general guidelines for state sales tax holidays. Some states are pretty specific about what you can exempt so be sure to click on the links to your individual state’s revenue announcement for more details. Also keep in mind that some states offer counties and towns the option not to participate, so again, check with your state if you have questions.

I’ll continue to update the list as information is made available (feel free to reach out to me with changes or updates that you notice). Happy shopping!

The Cincinnati Reds may not have had a winning record in Major League Baseball this year, but they were big winners in court. The Ohio Supreme Court ruled 5-2 that the Cincinnati Reds aren’t required to pay taxes on promotional items that they give to fans who attend their games.
You may recall that the Reds challenged the Tax Commissioner of Ohio earlier this year on the question of whether promotional items that come with tickets are subject to use tax.

Like many sports teams (including my Phillies), the Reds use promotional items like bobbleheads, wall posters, and baseball cards, to woo fans to their games. The Reds don’t charge their fans separately for these promotional items: they come along with the ticket purchase. The Commissioner slapped the Reds with a tax bill on the sale of these items, claiming that they should be subject to use tax.

Under Ohio state law (and in most states), however, there is an exemption available to parties who resale an item to a consumer. The Reds argued that they were reselling the promotional items by including them in the ticket price – you can’t get a bobblehead or other item without buying a ticket. If the club is considered a reseller of the item, it is not a taxable user and doesn’t owe tax. The Commissioner disagreed and the matter went to court.

The case, Cincinnati Reds, L.L.C. v. Testa, Slip Opinion No. 2018-Ohio-4669, was decided in favor of the Reds. Justice Patrick F. Fischer delivered the opinion for the majority.

(You can read the court’s opinion, which downloads as a PDF, here.)

At the hearing, Doug Healy, the Reds’ chief financial officer, testified that the purpose of distributing the bobbleheads and other promotional items is to encourage fans to buy tickets for games that would otherwise not be well attended. Healy explained that the increased ticket revenue more than offsets the cost of promotional items distributed – “[o]therwise we wouldn’t do it.”

The cost of the promotional items is absorbed into the price of the tickets. That is, the price of the tickets isn’t separately stated from the price of the promotional item. You can’t opt out of the promotional item and score a cheaper ticket, and the price of a ticket when the promotional item isn’t so great – a cheap pennant, maybe – doesn’t cost less than the price of an arguably cooler promotional item like a bobblehead.

And if the Reds run out of a promotional item? Healy testified that if that happened, the Reds “will remedy it” by giving another promotional item or complimentary tickets.

The Ohio Board of Tax Appeals (BTA) agreed with the Commissioner that the fans did not pay consideration for the promotional items, which would mean that the Reds were not entitled to an exemption as a reseller. The crux of their argument was that fans pay the same price to attend a game regardless of whether a promotional item is offered and the cost of the promotional item is not included in the ticket price. The BTA agreed and ruled against the Reds.

However, the Supreme Court disagreed with those findings. Healy specifically testified that the costs of promotional items are included in ticket prices and that promotional items are distributed at less popular games. In other words, rather than discount ticket prices for games that aren’t expected to be well attended, the Reds keep the cost of the tickets the same and add a promotional item to lure in fans. The court found, then, that the promotional items were things of value for which fans paid money; the cost is simply included in the ticket price. They are, the court wrote, “an explicit part of the bargain.”

So what does that mean? The transfer of the promotional items from the club to the fans constitutes a “sale” under Ohio state law. That makes the promotional items subject to the sale-for-resale exemption. The Reds are not, therefore, liable for use tax on the promotional items.

And with that, Justice Fischer wrote, “[I]n the familiar words of Marty Brennaman, longtime Reds radio announcer and recipient of the National Baseball Hall of Fame’s Ford C. Frick Award, we determine that ‘this one belongs to the Reds.’”

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