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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.
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?
A sign on the black metal door barricading Jim Ayers' spartan room at the Lawrence Hotel on Sixth Street reads "Don't knock on this door for nothing." The portal is a point of pride for Ayers, a retired sixtysomething ironworker and bartender who has lived behind it for 21 years. "I'm the only one here who has a steel door," he notes. "The only one."
Ayers lives off $909 a month. By the time he's paid rent, utilities, fuel for his truck — which he dutifully moves in the pre-dawn hours every night to avoid parking tickets — he doesn't have much left. He also doesn't have a kitchen, so you'll find him in a Tenderloin restaurant more days than not. Ayers gives a spirited rundown of the slings and arrows of the fare offered by local eateries; he knows them all and they all know him. Money's tight, naturally — but that's okay, Ayers says wearily. He can get by on two meals a day. Of course, he's being taxed on those two meals. "I just don't understand why I should be taxed for food that is cooked, yet I can have the same thing that's cold and not even prepared and I'll pay less," he says. "I just don't get it."