"It's just baloney," says Mikesell. "Which would not be taxed," he quickly adds. "Unless it were served in a sandwich."


The life of a Board of Equalization member isn't always the stuff of movies — but the stuff of movies does fall under the adjudication of the Board of Equalization. Bill Leonard, an elected member from 2003 to 2010, chuckles when he recalls "the popcorn case." Since cold food to go is often exempt from sales tax and hot food rarely is, Century Theaters faced an uphill battle arguing that it shouldn't remit sales tax to the state for movie popcorn. "They said those weren't heat lamps — those were dehumidifier lamps," Leonard recalls. "The whole room was laughing out loud." Despite being laughed out of court, Century Theaters returned several months later. This time, Leonard claims, it enlisted "popcorn experts" who had jammed "temperature probes in the boxes to show us what the temperature was." On second thought, the BOE bought the argument. Sales of movie popcorn is now tax-exempt in California; while the popcorn may be hot, the heat is simply a by-product of those "dehumidifier lamps." Since there is no "intention of heat," the popcorn is not taxable.

A rundown of California's food taxes and exemptions — and exemptions to the exemptions — rapidly begins to resemble an Abbott and Costello routine.

With no kitchen in his room, Jim Ayers is in a Tenderloin restaurant most days — getting taxed.
Joe Eskenazi
With no kitchen in his room, Jim Ayers is in a Tenderloin restaurant most days — getting taxed.

A hot sandwich to go would be taxable, while a prepackaged, cold one would not — but a cold sandwich becomes taxable if it has hot gravy poured onto it. Cold foods to go are generally not taxable — but hot foods that have cooled are taxable (meaning a cold sandwich slathered in "hot" gravy that has cooled to room temperature is taxable). Cold, non-carbonated, non-alcoholic beverages to go aren't taxable. Hot beverages to go are, but coffee and tea are specifically exempted from taxation. Soup, however, is taxable. Hot soup that has cooled? Still taxable. But, the BOE specifically informs SF Weekly, cold soups such as gazpacho are exempt.

Yet while neither an individual bowl of gazpacho nor a cup of hot coffee to go is taxable, the sale of gazpacho and coffee as a combo meal is taxable. Moreover, hot food to go isn't taxable if it falls under the "hot bakery goods" exemption. There is, however, no written definition of what constitutes "hot bakery goods."

"The BOE considers to be exempt from tax 'bakery goods', croissants, and similar products filled with cream or fruits, but as taxable the croissants and similar products when filled with meat, fish, eggs, vegetables, etc.," the BOE writes. "Samosas, empanadas, and other savory items would therefore be taxable, while cream-filled donuts would not."

The BOE does not have a ready answer for how to tax goods filled with the taxonomically ambiguous tomato.

How identical items are used — and who uses them — looms large in their tax status. Multiple states have pondered charging sales taxes on pumpkins used for jack-o'-lanterns, but not for pie or soup. (What to do about a consumer who carves a jack-o'-lantern, but roasts the pumpkin seeds, may be an unresolvable scenario.) Sob stories about people eating cans of dog food are even more lamentable as pet food is taxable while canned foods intended for humans are not.

In perhaps the most eye-opening case of this sort, the BOE claimed a business that sold fruits and vegetables to the San Francisco Zoo should have collected sales taxes on the transaction and sent them to the state. Per state law, sales tax is exempted on food sales when the food in question will be consumed by animals that are ordinarily suitable for human consumption. So a company selling the very same bag of animal feed will owe the state sales taxes if the feed is bought by a horse farm — but none if it's bought by a dairy farm. The BOE claimed that, since zoo creatures don't often end up on the dinner table, the state was owed back taxes.

Yet attorney Robert Wood redefined "California cuisine" by arguing that, since people in various corners of the globe consume monkeys, bison, antelopes, and other beasts, the fruit and vegetable sales should have been sales tax-exempt. He won his case. "It's amusing — but it's also distressing," he says now, 20 years later. "This stuff is bizarre; it makes you think of Dostoevsky. How could people sit around and think this stuff up?"

Of course, all of the aforementioned rules and exemptions may be moot if a retailer uses "the 80/80 rule." If 80 percent of a California merchant's gross receipts are from food products and 80 percent of retail sales are usually taxable, then, to streamline bookkeeping, the retailer may simply tax all sales. So a customer buying the very same bottle of milk — or, indeed, cup of hot chocolate — at the McDonald's on Haight and Stanyan and the Whole Foods across the street could pay sales tax at the first establishment but not the second.

A scenario in which McDonald's patrons are taxed but Whole Foods' clientele isn't leads to the multi-billion-dollar question: Is a convoluted, onerous system with the supposed upside of aiding the poor really aiding the poor?


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7 comments
withkaden
withkaden

Looks like it swallowed my previous comment.  Well, anyway, it's all taxable in Kansas - at 8.3% - NOT cheap.  And they rescinded the food sales tax rebate for low-income earners this year.  THAT'S hurting the poor.  I so miss California.

obbop
obbop

"There's class warfare, all right, Mr. (Warren) Buffett said, but it's my class, the rich class, that's making war, and we're winning"

"My friends and I have been coddled long enough by a billionaire-friendly Congress." - Billionaire Warren Buffett, in a New York Times op-ed on Aug. 15.

There has been class warfare going on," Buffett, 81, said in a Sept. 30 interview with Charlie Rose on PBS. It's just that my class is winning. And my class isn't just winning, I mean we're killing them."

Obey your ruling-class commoners and corporate USA, etc. you vile scum commoners.

OBEY!!!!!!!!!!!!!!

CarlsbadVillageOrthodontist
CarlsbadVillageOrthodontist

One really has to read the fine print, especially when it concerns the law and taxes. I never knew that food taxes are this complicated. Though, I guess in a way the less fortunate can have a little respite with food stamps?

anadromic
anadromic

For the TLDR crowd:

Hot, prepared food is taxed. Food you take home or cold food prepared in advance is not. As anyone would expect, life is not simple and there are gray areas between these categories. Many cases need to be considered and decided on their own, often in a less-than-perfect way.

anadromic
anadromic

Actually, I don't mean to hate so much. It's an interesting piece. But the "penalizes the poor and benefits the rich" subhed? Meh. That's a stretch, dude.

Dave Lieberman
Dave Lieberman

Look up the phrase "food desert" and you'll see why this system penalizes the poor. When all you have nearby is convenience stores and restaurants, nearly everything you buy is taxed.

I fail to see why we can't tax food, even at a lower rate, and specifically require that EFTPOS (food stamp) purchases be exempt.

Joe Eskenazi
Joe Eskenazi

Dave --

Thanks for reading and an erudite comment.

Food stamp purchases are already tax-free, even in states that tax food.

Best,

JE

 
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