Because Indoff has a nexus in every state, we collect sales tax based on the rate of state and municipality where the order ships to.
We have a great system in place with our online order entry system in which we are able to classify every line item we enter, and the software takes care of assessing the appropriate tax based on the ship to.
I'm adding food gifts from Maple Ridge to an online company store program for a national account.
Issues I've encountered:
--Many states do not require that sales tax be collected on unprepared food, but it is to be collected on prepared food. (The basic rule of thumb is whether or not it's available for immediate consumption. If it is, it's typically subject to sales tax. Popped popcorn gets taxed. Unpopped popcorn kernels do not get taxed.)
Last year with the Iowa Department of Revenue, we were able to determine that Maple Ridge's ham and cutting board was classified as unprepared food. Even though the ham was fully cooked, it was recommended that it be heated in an oven before serving. We added a classification of UNPREPARED FOOD to account for sales tax exemption in the appropriate states.
--The food comes with a hard good that cannot be consumed. In this ham case, it came with a cutting board. The value of the cutting board was less than 50% of the total package, so the sales tax rules for an unprepared ham prevailed in the state of Iowa.
--I'm encountering a Maple Ridge item (truck with nuts ready for immediate consumption) where the value of the truck is more than 50% of the total package, so it likely should be classified as hard goods (and subject to normal sales tax) and not be classified as food for immediate consumption (which is not subject to sales tax collection in some states).
I'm basing this assumption off of rules for Iowa's Department of Revenue. I've asked Maple Ridge to provide a list of items where the packaging/accompanying gift has greater value than the food.
I have Indoff's VP of Finance investigating this for me. Out of curiosity, how have you handled the collection of sales tax for varying food gifts?
Our Sponsors
0
4 replies to this topic
#2
-
- Members
- 1,701 posts
Regular Member
Posted 05 March 2010 - 03:32 PM
Clarification: Food of any kind is not subject to sales tax in Iowa (and Texas, apparently).
We learned about the sales tax exemption for unprepared foods (such as Maple Ridge Farms' ham) when Maple Ridge told us that when they sell hams to their employees in Wisconsin, they don't collect sales tax . . . whereas when they sell nuts and toffee and all those other goodies to employees, they do collect sales tax.
I grew up in Wisconsin, so I was used to the prepared/unprepared food rules. It was always explained to me with popcorn (popped or unpopped). I'm pretty sure it's the same in Minnesota.
It was because Maple Ridge Farms classified their hams not being ready for immediate consumption that we introduced the UNPREPARED FOOD category for Indoff Partners to use when entering sales orders.
We learned about the sales tax exemption for unprepared foods (such as Maple Ridge Farms' ham) when Maple Ridge told us that when they sell hams to their employees in Wisconsin, they don't collect sales tax . . . whereas when they sell nuts and toffee and all those other goodies to employees, they do collect sales tax.
I grew up in Wisconsin, so I was used to the prepared/unprepared food rules. It was always explained to me with popcorn (popped or unpopped). I'm pretty sure it's the same in Minnesota.
It was because Maple Ridge Farms classified their hams not being ready for immediate consumption that we introduced the UNPREPARED FOOD category for Indoff Partners to use when entering sales orders.
#3
-
- Members
- 1,701 posts
Regular Member
Posted 09 March 2010 - 09:41 AM
I'm particularly interested in hearing from distributors that collect sales tax in Iowa and Texas . . .
#4
-
- Members
- 1,701 posts
Regular Member
1 user(s) are reading this topic
0 members, 1 guests, 0 anonymous users
