Tough times require tough decisions, Part III: From the Cracker Squire Archives -- Time to remove the sales tax exemption on groceries.
The past legislative session the subject of this post did not get the reception it deserved. It was in a bill introduced by Rep. Chuck Sims (my district's representative), and although it did not pass, I continue to predict that in time it will be seriously considered. This coming legislative session may be that time.
According to the ajc's Gold Dome Live on March 10, 2009:
Just a few days after the House Ways & Means Committee passed a bill to put the state sales tax back on groceries, a House source said the measure isn’t likely to get to the House floor for a vote.
The AJC reported Tuesday that House leaders said they were planning to put the bill up for a vote Thursday.
But once the idea hit the media, Republican blogs exploded in opposition to the idea of putting the state’s 4 percent sales tax back on groceries. It was removed by a Democrat-run General Assembly in the mid-to-late 1990s.
If you or a friend, neighbor, family member or acquaintance are one of Georgia's 128,000 teachers or other 100,000 who work for the state, your employment and most definitely your compensation may be affected as evidenced by action taken this past Tuesday.
And just as obviously, the educational services we are able to provide to our 2 million students and the assistance available to the 1.5 million receiving health care could be impacted, as well as the ability of the state to continue providing basic services at levels we take for granted.
This is a reposting of a 10-09-04 post entitled "The time is now; the need is acute; sponsors solicited and welcome -- In 2005 the Gen. Assembly needs to remove the sales tax exemption on groceries." In it I discuss the nuances of this exemption and make my case for doing away with it entirely.
And prior to doing so, I note, as alluded to in the below post, that I am a Democrat, and consider myself a good Democrat. Thus I know the arguments for and against a regressive sales tax.
(And for my fellow Democrats who might want to evict me from the party for heresy for even discussing killing the sales tax exemption on groceries, much less advocating it, I find solace and can safely take refuge in having observed one thing firsthand as a member of the State Committee Member. Like me or not, like my idea or not, you can’t kick me out of the party, can they Zell? But if you want me off the State Committee for having and expressing my ideas, that is another thing. Bring it to the proper officials and if it is their desire, I will resign.)
The 2004 post is, in part, as follows:
A shopping trip to learn the law:
Let’s go shopping in any Georgia county with a 1% SPLOST in effect, whether the local option sales tax is for your county, a municipality or the school district. I’ll make up the "grocery list."
If I asked you to note which items on my grocery list were subject to at least some sales tax, many of you would not score 100 I feel confident. But first let me make it a bit easier to get a higher score.
As you may or may not be aware, Georgia’s sales tax exemption for "food and beverages" does not apply to any 1% SPLOST. Put another way, Georgia’s statutory and constitutional provisions dealing with 1% SPLOST’s -- whether for counties, cities or school districts -- provide that the 1% tax imposed is applicable to the sale of food and beverages.
Thus I will simplify the situation; let’s just go shopping in a county without a 1% SPLOST in effect. As the following will demonstrate, the exemption for "food and beverages" is not as simple as it might appear.
The following would be subject to the regular sales tax, even though I am buying them at a grocery store:
Toiletries, napkins, laundry detergents, vitamins, pet food, alcohol, tobacco products, food which is hot at the point of sale (thus food which is cooked on-premises and kept warm will not be exempt, such as a grocery stores selling hot roasted chicken from a rotisserie), food sold in grocery stores to be eaten in the store (such as ice cream or soft drinks sold in open containers or through vending machines), etc.
The following would be exempt from the regular sales tax:
Staple food products for home consumption such as meat, poultry, fish, bread, cereals, milk, soft drinks, and infant formulas packaged for home consumption.
The Department of Revenue ("DOR") regulations say the purpose of the "food and beverages" exemption is to exempt from sales tax food purchased to be taken home, prepared and eaten. The general rule is that eligible food, sold to be eaten off-premises, qualifies for the exemption. Food sold to be eaten on-premises is not exempt.
Therefore, Georgia's regulations center on the type of food being sold and where the food is consumed.
Is this logical? It sounds likes governmental bureaucracy reins doesn’t it. It gets better.
To be understand the following, realize that eligible food (that is, food exempt from sales tax) is any food item which could be purchased with federal food stamps or WIC coupons.
And this is probably a good point to note that federal law conditions state participation in the food stamp program on the state exempting from sales taxes, purchases made with food stamps. For this reason -- generally speaking -- purchases made with food stamps have always been and will remain exempt from sales taxes.
Getting back to bureaucracy. The DOR has classified food dealers into three categories. The first category is food dealers or retailers which accept food stamps. The second category is food dealers which do not accept food stamps, but whose sales of eligible food comprise at least 50% staple items. The third category is for all other dealers including dealers which also serve the food on-premises.
Dealers in the first category (those who accept food stamps) have to keep separate records of eligible and ineligible food sales, but all sales of eligible foods will be presumed to be for off-premises consumption.
Dealers in the second category (those who do not accept food stamps) must show that 50% of their eligible food sales comprise staple products (that is, meats, breads, cereals, vegetables and dairy products). Once the retailer shows that 50% of eligible sales consist of staple products, then all eligible sales (as identified by the dealer) will be presumed to be for off-premises consumption.
Dealers in the first category, especially those with facilities for eating on-premises whose mix of eligible food sales do not fit into the second category, have the burden of maintaining records to show that the sale was for off-premises consumption. The DOR presumes that the sale was for on-premises consumption, and thus subject to the full tax unless the dealer can provide records to the contrary (that is, an item is sold "to go").
As an example, a grocery store sale of a dozen doughnuts will be presumed to be for off-premises consumption. A convenience store sale of a dozen doughnuts will likewise be presumed for off-premises consumption, but only if 50% of the store's eligible sales consist of staple products. A doughnut shop sale of a dozen doughnuts will be presumed for on-premises consumption unless the retailer keeps records indicating that the sale was for off-premises consumption.
I did not start out to make this the "food and beverages exemption 101," but you get the point. As stated above, the exemption for "food and beverages" is not as simple as it might appear.
Georgia’s current [2004] budget crisis:
My solution is an idea whose time has come, whether we like it or not. I do not see any other practical alternatives to the financial situation of our state that could pass without undue partisan quibbling. And for sure I have not heard about any being floated.
It is not one that I think should be politicized.
This posting is not exhaustive, but is intended to generate discussion and get the ball rolling, and the sooner the better.
A brief history of Georgia’s sales tax and the exemption for groceries:
Over a half century ago then-Gov. Herman Talmadge had the legislature enact a 3% sales tax to finance across-the-board improvements in schools, highways and welfare and public health services. Along with the legislation came many exemptions, some from the outset and others such as for prescription drugs with subsequent legislation.
The general sales tax is an important source of revenue for the state, representing I think I have read some 35% or more of all state government tax revenue. I claim no accuracy whatsoever on this figure, but the role of this tax is significant, very significant.
In the nineties then-Gov. Zell Miller began a move toward tax relief by persuading the legislature to remove the sales tax on groceries. The legislation exempting the sale of groceries from sales taxes was phased in over several years, and was complete in 1998.
Thereafter Gov. Roy Barnes came along in 1999, and in the same spirit of tax relief for the masses, lowered property taxes and made it more difficult for local governments and school districts to raise them.
Throughout all of these administrations, even though we have needed to improve and go forward with ambitious transportation improvement plans, an increase in our state’s motor fuel tax -- one of the lowest motor fuel taxes in the nation and much of any increase which would be borne by non-Georgians -- has been on the untouchable list.
(I have reason to believe that this logical tax increase would have become a reality had Gov. Barnes been elected to a second term. Maybe not real early in his term with the economy down and gas prices on the rise, but during his second term nonetheless.)
With Democrat Gov. Miller having lowered sales taxes by exempting groceries, Democrat Gov. Barnes having lowered property taxes, what in the world would Republican Perdue do in the way of proposing his own tax reductions.
As we remember, rather than continuing to please the masses, Gov. Perdue temporarily suffered amnesia and forgot them that brung him to the Gold Dome. Rather than cutting, his first major proposal involved raising taxes. And it wasn’t just going to be to get King Roy back by raising the property taxes that Barnes had cut.
The new governor also wanted to increase revenue for the state by reducing the consumption of taxable evil products.
(Say what Gov.? Easy, says he; I propose increasing taxes on cigarettes and liquor as a way to help balance the state budget and, at the same time, dissuade Georgians from buying alcohol and tobacco.)
Although we in South Georgia sure didn’t appreciate the Governor adding taxes to our cash crop tobacco as if our farmers didn’t already have problems enough from Washington, a compromise in Perdue’s proposed tax increase ultimately did prevail.
. . . .
Folks, the reality of the state of the state is that now health care and education costs make up 75% of the state budget, and are rising faster than tax collections, the latter being up somewhat as of late with the state’s improving economy.
Further education cuts, which are being passed to local school districts, will result in property tax increases. As a school board attorney watching such things, I have observed a shift where taxpayers seem to approve of such things as textbooks, computers and buses that were formerly financed by maintenance and operation funds (read "property taxes"), now routinely being included in SPLOST referendums, along with, of course, new or upgraded school facilities.
. . . .
Senator Everett Dirksen uttered his famous words about the U.S. government’s spending some thirty or so years ago: "A billion here, a billion there, and pretty soon you’re talking real money." The same things applies in Georgia when we are talking millions.
I am a Democrat, and consider myself a good Democrat . . . . Thus I know the arguments for and against a regressive sales tax.
(And for those of you wanting to evict me from the party for heresy for even discussing killing the sales tax exemption on groceries, much less advocating it, I find solace and can safely take refuge in having observed one thing. Like me or not, like my idea or not, you can’t kick me out of the party, can they Zell?)
I have reviewed which states do and do not exempt groceries for home consumption by reviewing a study prepared by the Center on Budget and Policy Priorities.
So how much money are we talking about here if we killed the exemption that I wish Gov. Miller never had pioneered when times we better?
I am not sure. I saw a DOR press release in 1998 when the final 1 cent was going off. It said the complete elimination of state sales tax on groceries was estimated to be in the range of $550 million.
I have heard that now the figure may be around $865 million. For me the amount is not that important. This exemption is one that represents a situation where it is best to turn back the hands of time.
According to the ajc's Gold Dome Live on March 10, 2009:
Just a few days after the House Ways & Means Committee passed a bill to put the state sales tax back on groceries, a House source said the measure isn’t likely to get to the House floor for a vote.
The AJC reported Tuesday that House leaders said they were planning to put the bill up for a vote Thursday.
But once the idea hit the media, Republican blogs exploded in opposition to the idea of putting the state’s 4 percent sales tax back on groceries. It was removed by a Democrat-run General Assembly in the mid-to-late 1990s.
If you or a friend, neighbor, family member or acquaintance are one of Georgia's 128,000 teachers or other 100,000 who work for the state, your employment and most definitely your compensation may be affected as evidenced by action taken this past Tuesday.
And just as obviously, the educational services we are able to provide to our 2 million students and the assistance available to the 1.5 million receiving health care could be impacted, as well as the ability of the state to continue providing basic services at levels we take for granted.
This is a reposting of a 10-09-04 post entitled "The time is now; the need is acute; sponsors solicited and welcome -- In 2005 the Gen. Assembly needs to remove the sales tax exemption on groceries." In it I discuss the nuances of this exemption and make my case for doing away with it entirely.
And prior to doing so, I note, as alluded to in the below post, that I am a Democrat, and consider myself a good Democrat. Thus I know the arguments for and against a regressive sales tax.
(And for my fellow Democrats who might want to evict me from the party for heresy for even discussing killing the sales tax exemption on groceries, much less advocating it, I find solace and can safely take refuge in having observed one thing firsthand as a member of the State Committee Member. Like me or not, like my idea or not, you can’t kick me out of the party, can they Zell? But if you want me off the State Committee for having and expressing my ideas, that is another thing. Bring it to the proper officials and if it is their desire, I will resign.)
The 2004 post is, in part, as follows:
A shopping trip to learn the law:
Let’s go shopping in any Georgia county with a 1% SPLOST in effect, whether the local option sales tax is for your county, a municipality or the school district. I’ll make up the "grocery list."
If I asked you to note which items on my grocery list were subject to at least some sales tax, many of you would not score 100 I feel confident. But first let me make it a bit easier to get a higher score.
As you may or may not be aware, Georgia’s sales tax exemption for "food and beverages" does not apply to any 1% SPLOST. Put another way, Georgia’s statutory and constitutional provisions dealing with 1% SPLOST’s -- whether for counties, cities or school districts -- provide that the 1% tax imposed is applicable to the sale of food and beverages.
Thus I will simplify the situation; let’s just go shopping in a county without a 1% SPLOST in effect. As the following will demonstrate, the exemption for "food and beverages" is not as simple as it might appear.
The following would be subject to the regular sales tax, even though I am buying them at a grocery store:
Toiletries, napkins, laundry detergents, vitamins, pet food, alcohol, tobacco products, food which is hot at the point of sale (thus food which is cooked on-premises and kept warm will not be exempt, such as a grocery stores selling hot roasted chicken from a rotisserie), food sold in grocery stores to be eaten in the store (such as ice cream or soft drinks sold in open containers or through vending machines), etc.
The following would be exempt from the regular sales tax:
Staple food products for home consumption such as meat, poultry, fish, bread, cereals, milk, soft drinks, and infant formulas packaged for home consumption.
The Department of Revenue ("DOR") regulations say the purpose of the "food and beverages" exemption is to exempt from sales tax food purchased to be taken home, prepared and eaten. The general rule is that eligible food, sold to be eaten off-premises, qualifies for the exemption. Food sold to be eaten on-premises is not exempt.
Therefore, Georgia's regulations center on the type of food being sold and where the food is consumed.
Is this logical? It sounds likes governmental bureaucracy reins doesn’t it. It gets better.
To be understand the following, realize that eligible food (that is, food exempt from sales tax) is any food item which could be purchased with federal food stamps or WIC coupons.
And this is probably a good point to note that federal law conditions state participation in the food stamp program on the state exempting from sales taxes, purchases made with food stamps. For this reason -- generally speaking -- purchases made with food stamps have always been and will remain exempt from sales taxes.
Getting back to bureaucracy. The DOR has classified food dealers into three categories. The first category is food dealers or retailers which accept food stamps. The second category is food dealers which do not accept food stamps, but whose sales of eligible food comprise at least 50% staple items. The third category is for all other dealers including dealers which also serve the food on-premises.
Dealers in the first category (those who accept food stamps) have to keep separate records of eligible and ineligible food sales, but all sales of eligible foods will be presumed to be for off-premises consumption.
Dealers in the second category (those who do not accept food stamps) must show that 50% of their eligible food sales comprise staple products (that is, meats, breads, cereals, vegetables and dairy products). Once the retailer shows that 50% of eligible sales consist of staple products, then all eligible sales (as identified by the dealer) will be presumed to be for off-premises consumption.
Dealers in the first category, especially those with facilities for eating on-premises whose mix of eligible food sales do not fit into the second category, have the burden of maintaining records to show that the sale was for off-premises consumption. The DOR presumes that the sale was for on-premises consumption, and thus subject to the full tax unless the dealer can provide records to the contrary (that is, an item is sold "to go").
As an example, a grocery store sale of a dozen doughnuts will be presumed to be for off-premises consumption. A convenience store sale of a dozen doughnuts will likewise be presumed for off-premises consumption, but only if 50% of the store's eligible sales consist of staple products. A doughnut shop sale of a dozen doughnuts will be presumed for on-premises consumption unless the retailer keeps records indicating that the sale was for off-premises consumption.
I did not start out to make this the "food and beverages exemption 101," but you get the point. As stated above, the exemption for "food and beverages" is not as simple as it might appear.
Georgia’s current [2004] budget crisis:
My solution is an idea whose time has come, whether we like it or not. I do not see any other practical alternatives to the financial situation of our state that could pass without undue partisan quibbling. And for sure I have not heard about any being floated.
It is not one that I think should be politicized.
This posting is not exhaustive, but is intended to generate discussion and get the ball rolling, and the sooner the better.
A brief history of Georgia’s sales tax and the exemption for groceries:
Over a half century ago then-Gov. Herman Talmadge had the legislature enact a 3% sales tax to finance across-the-board improvements in schools, highways and welfare and public health services. Along with the legislation came many exemptions, some from the outset and others such as for prescription drugs with subsequent legislation.
The general sales tax is an important source of revenue for the state, representing I think I have read some 35% or more of all state government tax revenue. I claim no accuracy whatsoever on this figure, but the role of this tax is significant, very significant.
In the nineties then-Gov. Zell Miller began a move toward tax relief by persuading the legislature to remove the sales tax on groceries. The legislation exempting the sale of groceries from sales taxes was phased in over several years, and was complete in 1998.
Thereafter Gov. Roy Barnes came along in 1999, and in the same spirit of tax relief for the masses, lowered property taxes and made it more difficult for local governments and school districts to raise them.
Throughout all of these administrations, even though we have needed to improve and go forward with ambitious transportation improvement plans, an increase in our state’s motor fuel tax -- one of the lowest motor fuel taxes in the nation and much of any increase which would be borne by non-Georgians -- has been on the untouchable list.
(I have reason to believe that this logical tax increase would have become a reality had Gov. Barnes been elected to a second term. Maybe not real early in his term with the economy down and gas prices on the rise, but during his second term nonetheless.)
With Democrat Gov. Miller having lowered sales taxes by exempting groceries, Democrat Gov. Barnes having lowered property taxes, what in the world would Republican Perdue do in the way of proposing his own tax reductions.
As we remember, rather than continuing to please the masses, Gov. Perdue temporarily suffered amnesia and forgot them that brung him to the Gold Dome. Rather than cutting, his first major proposal involved raising taxes. And it wasn’t just going to be to get King Roy back by raising the property taxes that Barnes had cut.
The new governor also wanted to increase revenue for the state by reducing the consumption of taxable evil products.
(Say what Gov.? Easy, says he; I propose increasing taxes on cigarettes and liquor as a way to help balance the state budget and, at the same time, dissuade Georgians from buying alcohol and tobacco.)
Although we in South Georgia sure didn’t appreciate the Governor adding taxes to our cash crop tobacco as if our farmers didn’t already have problems enough from Washington, a compromise in Perdue’s proposed tax increase ultimately did prevail.
. . . .
Folks, the reality of the state of the state is that now health care and education costs make up 75% of the state budget, and are rising faster than tax collections, the latter being up somewhat as of late with the state’s improving economy.
Further education cuts, which are being passed to local school districts, will result in property tax increases. As a school board attorney watching such things, I have observed a shift where taxpayers seem to approve of such things as textbooks, computers and buses that were formerly financed by maintenance and operation funds (read "property taxes"), now routinely being included in SPLOST referendums, along with, of course, new or upgraded school facilities.
. . . .
Senator Everett Dirksen uttered his famous words about the U.S. government’s spending some thirty or so years ago: "A billion here, a billion there, and pretty soon you’re talking real money." The same things applies in Georgia when we are talking millions.
I am a Democrat, and consider myself a good Democrat . . . . Thus I know the arguments for and against a regressive sales tax.
(And for those of you wanting to evict me from the party for heresy for even discussing killing the sales tax exemption on groceries, much less advocating it, I find solace and can safely take refuge in having observed one thing. Like me or not, like my idea or not, you can’t kick me out of the party, can they Zell?)
I have reviewed which states do and do not exempt groceries for home consumption by reviewing a study prepared by the Center on Budget and Policy Priorities.
So how much money are we talking about here if we killed the exemption that I wish Gov. Miller never had pioneered when times we better?
I am not sure. I saw a DOR press release in 1998 when the final 1 cent was going off. It said the complete elimination of state sales tax on groceries was estimated to be in the range of $550 million.
I have heard that now the figure may be around $865 million. For me the amount is not that important. This exemption is one that represents a situation where it is best to turn back the hands of time.
posted by Sid Cottingham | 4:22 PM
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