ingredients and taxes

[g-nome]

This has been bothering me for a short while.

Going to the home brew store, if I buy malted barley, corn sugar, bitter orange peel, extract, and coriander, I am charged our state plus local sales tax of 8.1% (or so) on all of the food ingredients of making beer.

If I go to the grocery store and buy flour, sugar, coriander, and dried orange peel I don't pay taxes because these are food items.

If I buy these items in a slice of pie or a beer at a restaurant, I pay taxes again.

I asked the LHBS clerk if he knew (but he didn't understand the question) why....so I ask. Why do I have to pay taxes on food ingredients just because they are ingredients at a HBS rather than a grocery store?

Either the LHBS is adding a surcharge and keeping it, or the state is charging when they shouldn't be.....or if I add cane sugar from a grocery store, I am breaking tax laws.

How is it at your state and LHBS, and are there LHBS owners that can enlighten me on this issue.

I don't really mind paying taxes, but if I am buying flour, then, I should be paying taxes on that as well....or not at all....it is all unprepared food.

 

[david_42]

Only your tax board can explain the specifics, but it is quite common for groceries to be exempt. The LHBS might be able to get exemptions for many of the ingredients, but I suspect the paperwork would be a royal pain.

 

[Austinhomebrew]

Prepared food is taxable, such as the pie at the restaurant. If you buy the ingredient to make the pie, you don't pay tax. Beer is a prepared food so it is taxed but the ingredients should not be taxed. We dont charge tax for our ingredients. Some states may be different but I wouldn't think so for these ingredients. Do some research about your state.

Forrest

 

[g-nome]

Thank you AHS....this is what I think....I should not be charged tax on my malt, sugar, etc. at the homebrew store....my guess is that either the lhbs isn't aware, or is too lazy to change their computer or apply for exemption, or has been collecting taxes for the government that they shouldn't.....this is the lesser evil explanation. The greater evil would be that they know about it, but pocket the 8% windfall, or that the governments are doing the same. The profit motive for the lhbs is significant (8% bonus on 50-80% of sales), but the government's profit motive is very insignificant.

 

[davesrose]

I would try to look up specifics about your state: every state is different. For example, this thread educated me about states offering exemption of sales tax on food: apparently Georgia charges local tax on food, which in my area is still the 8% I get charged ordinarily.

 

[Scooby_Brew]

I just bought 29 lbs. of grains for a double batch of CDA, and my LHBS charged me tax only on 1.5 lbs. of Carafa II. Maybe Carafa II is not a food item and the rest of the grains are? I dunno.
The other LHBS in my area charges tax for everything (and that's one of the reasons I don't use them too often). I suspect they are probably keeping that money for themselves.

 

[ToddO]

Interesting and I never thought about this - just checked a receipt from yesterday and I was charged no taxes for all ingredients for a pale ale including yeast from the LHBS. I would totally ask them about it but as said above maybe it is a state thing.

 

[remilard]

IMO no state ought to exempt homebrewing ingredients from tax and I doubt any state did it intentionally. Exemptions, such that they exist, should be for necessary items.

 

[rico567]

Poorer, non-industrial states often charge high-tax on food. Seems counter-intuitive.....but the taxes have to come from somewhere, and often revenue from property or industry is minimal in those states. The sales tax issue is quite byzantine, and doesn't translate well from one state to the next......like the laws on alcoholic beverages and guns.

What passes for a LHBS locally (a large beverage mart) has high prices, but charges low tax (1% food & medicine in IL) on brewing ingredients. I buy almost all of my stuff on line because of their prices....

What we will face sooner or later as a "solution" to all this a US version of the the VAT (value-added tax) in Europe. It will be sold as an attempt to provide equity among the states, which cannot be resolved now because of constitutional issues.

 

[Nugent]

We just switched from a separate provincial plus federal sales tax system to a combined tax of 12%. No tax on brewing stuff before or now. :rockin:

And I'm in Canada!!

 

[Scooby_Brew]

IMO no state ought to exempt homebrewing ingredients from tax and I doubt any state did it intentionally. Exemptions, such that they exist, should be for necessary items.

It would be hard for any state to tax sugar in a LHBS, but not in a Local Grocery Store. Same with yeast, which is used for baking cakes and bread. Malt extract is used in breakfast cereals, and corn flakes and oat meal is used to brew beer. So how do you want to decide what food item do you want to tax or not - and from which exact store?

 

[944play]

The sales tax issue is quite byzantine

Here's a good one: GBC at my LHBS pointed out that in CA, beer yeast is not taxable, but wine yeast is taxed! The state has deemed that beer yeast is food and wine yeast is a "processing agent" or something.

 

[curlyfat]

In my state there's no tax on food as well. My brew shop has never charged the tax on the "food" parts of beer, but all equipment/chemicals/supplies are (of course) taxed.

And no offense to the guy, but I don't think he's so savvy he's interpreting some complex tax code. To the OP, my guess is that somehow the LHBS never realized they shouldn't be collecting tax on the items, and the government isn't going to investigate to see if someone is paying too much in taxes. I'm hard pressed to believe they're pocketing the money, but probably just filling out their tax forms all in one lump, rather than separating out taxed/non-taxed items.

 

[rico567]

Here's a good one: GBC at my LHBS pointed out that in CA, beer yeast is not taxable, but wine yeast is taxed! The state has deemed that beer yeast is food and wine yeast is a "processing agent" or something.

If you or I do this, the state deems it "arbitrary and capricious" and it's illegal.

If the state does it, you're faced with dealing with a brick wall to get equity.

A friend of mine says we've spent 200 years passing laws in this country, we need to spend at least a century repealing some.

 

[PicoD42]

my guess is that somehow the LHBS never realized they shouldn't be collecting tax on the items, and the government isn't going to investigate to see if someone is paying too much in taxes. I'm hard pressed to believe they're pocketing the money, but probably just filling out their tax forms all in one lump, rather than separating out taxed/non-taxed items.

I think you hit the nail on the head here. In Ohio, soda is considered a non-food item and is taxed. Unfortunately, most convenience stores also charge tax on bottled water (which is non-taxable) since they come from the same manufacturer (ie Dasani and Aquafina are Coke and Pepsi products). The state is certainly not going to tell them they're paying too much!

 

[rico567]

I think you hit the nail on the head here. In Ohio, soda is considered a non-food item and is taxed. Unfortunately, most convenience stores also charge tax on bottled water (which is non-taxable) since they come from the same manufacturer (ie Dasani and Aquafina are Coke and Pepsi products). The state is certainly not going to tell them they're paying too much!

In any store around here, the high / low tax items are all just part of the process of ringing things up on the computer. An item is entered that way, and its tax level is completely automatic, and the sales tax appears broken down into high / low / total at the bottom. This doesn't actually require anyone to DO anything in the Age of Bar Codes, other than to properly enter the item into the computer in the first place.

This, of course, doesn't eliminate the possibility of human ignorance, stupidity, or laziness. Nothing does.