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SALT TALK:  You Are What You Eat – How Sales Tax Can Get You In Shape

Posted by Wayne Berkowitz CPA, J.D., LL.M. on May 16, 2016 1:00:00 PM
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When I was just getting started in the SALT arena, not only were SALT specialists viewed with a modicum of dismay, but if sales and use tax were your focus, most federal tax practitioners wouldn’t be caught within fifty feet of you. That view has radically changed over the last twenty or so years and now SALT specialists, especially those with a focus on sales and use tax, are viewed as champions of the profession.

I can’t completely blame my federal brethren for their misguided views of the past. Who in their right minds would want to specialize in a field where taxability of an item or a transaction turned on some of the (let’s call them) highly technical nuances outlined below:

  • Twix “candy” bars could be subject to sales tax if located in the candy aisle, but exempt from sales tax if located elsewhere in the supermarket (taxable candy vs. nontaxable food);
  • Bagels, generally a non-taxable food item, become subject to the sales tax if they are altered in any way (slicing, toasting, etc.);
  • Fruit drinks are taxable, yet fruit juice is exempt;
  • Small marshmallows are exempt as a baking ingredient, while large marshmallows are taxable candy.

The list goes on and on and the “nuances” vary from jurisdiction to jurisdiction. Life gets much more complicated when these same type of distinctions turn up in important areas, such as the ground up construction of a building or a gut or partial renovation of an existing project. Similarly, the purchase of an entire building may hinge on the structure of the deal as well as the location of the property.

While not paying tax you might owe is bad enough, matters get worse when you didn’t collect sales tax that someone else (your customer) owes and you are left with the responsibility. At Berdon, we have always been proud to have a deep understanding of sales tax. It has helped us keep our clients in shape, not only by making the right food choices, but by minimizing their sales tax costs.

Should you have questions regarding sales tax issues, contact me at WBerkowitz@berdonllp.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises clients on the unique requirements of governments and municipalities across the nation.

Topics: SALT TALK

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