Your A/P staffers are well aware of the ways state revenue departments make life complicated with their ever-changing sales & use tax laws.
Seasoned A/P pros are typically able to follow the logic behind some of the unusual sales & use tax requirements out there. For example, in Kansas hot-air balloon rides aren’t taxable because they’re considered transportation. However, tethered hot-air balloon rides are subject to an amusement tax.
But then there are the state sales & use taxes on the books that are downright puzzling.
Sales & use tax oddities
- California: Although it’s one of the biggest fruit producers in the country, the Golden State doesn’t give residents any incentive to choose it as a snack from vending machines. Sliced applies or fruit salad from a machine costs an extra 33% in taxes. But if you plan ahead and buy fruit from a grocery store in the state you avoid the tax.
- Illinois: There’s a 6.25% tax on candy, unless it has flour as an ingredient. So for example, if you’re buying M&Ms as employee snacks, which don’t contain flour, the tax applies. However, Kit Kat and Twix bars don’t get the candy tax since they contain flour. Those candies would normally be subject to the 1% state food tax, but it’s suspended as part of a sales tax holiday in effect till the middle of next year.
- Tennessee: If you have to go to court in the Volunteer State, watch out for the litigation taxes! In civil court, the plaintiff is responsible for that tax.
- Delaware: The First State has a low corporate income tax rate of 8.7%, and no state or local sales tax. But don’t forget about the gross receipt tax levied on businesses that provide goods or services in the state. It ranges from 0.0945% to .7468%, depending on the business activity.
- Colorado: “Nonessential packaging,” including coffee cup lids, is subject to a 2.9% tax. So a coffee cup is essential, but the lid – which helps to keep you from spilling coffee all over your car if you make a sudden stop – is not.
- Ohio: The tax code in the Buckeye State says human organs, bones, tissue, blood or blood products are not subject to sales tax. However, human hair, animal organs, or “other products not of human origin” for transplantation or implantation are subject to sales & use tax. So artificial joints to replace knees or hips are subject to sales tax, but a kidney transplant is not.
- Pennsylvania: Liquor has a hidden 18% tax. It was intended to be temporary to help the recovery from flooding that happened throughout the state on St. Patrick’s Day 1936, but it was never repealed.
- Arizona: Ice cubes, like the kind in mixed drinks, are considered food and aren’t taxable. But a block of ice to keep food cold comes with a transaction privilege tax paid by the vendor, which is then passed along to the consumer.
- Texas: The Lone Star State offers a sales tax holiday on many clothing items. It applies to cowboy boots, but not to big belt buckles, which are taxed.
