Taxability matrix: Are pumpkins tax exempt?
Are pumpkins considered tax exempt food or non-exempt decorative items?
Pumpkins are one of those items where it isn’t clear whether the buyer is going to eat them or play with them. Only six states — Alabama, Idaho, Kansas, Mississippi, Oklahoma and South Dakota — do not exempt or at least reduce the sales tax rate on food and grocery items. This leaves pumpkin sellers with a conundrum. How is the determination to be made as to whether they are tax exempt food?
Back in 2007, Iowa briefly enacted and that same year repealed a law forcing retailers to attempt to determine whether the purchaser’s intended to eat or carve the bright orange squash. They were then supposed to charge sales tax on the carving jack-o’-lantern but exempt the sales tax for the delicious little soon-to-be treat.
The Iowa tax department sent a bulletin to retailers reminding them that where once all pumpkins were tax exempt food, now they were to be taxable if they were 1) advertised to be used as jack-o’-lanterns; and 2) they were understood to be jack-o’lanterns. How exactly one is supposed to “understand” the intended usage of a buyer and later prove that to the department of taxation is left to your imagination.
To complicate the matter even further, Iowa’s pumpkins could still be sales tax exempt if 1) the buyer presented a sales tax exemption certificate; 2) the pumpkin was of a pie variety and specifically advertised for that purpose, or 3) they were purchased using food stamps.
How are pumpkins treated in your state? Did you pay sales tax when you bought yours this year. Please comment and let us know your experience.
Lucinda Rowlands has been the general manager at Zip2Tax since 2010. She has extensively researched sales and use tax regulations in order to help small businesses navigate complicated tax rules.