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Banana tax missing from billion-dollar budget flap, but it’s costing you

Tribune/Naples Daily News Capital Bureau
Published: May 13, 2015 Updated: May 13, 2015 at 11:33 PM
Tallahassee coffee shop owner Carla Reid sits next to her banana assortment, which may be taxable or not, depending on whether you take one to go. STAFF/JAMES ROSICA

TALLAHASSEE — With the next year’s budget still in turmoil, Gov. Rick Scott has all but given up on his proposed $673 million tax cut package.

Not included in that proposal was the banana tax.

In Florida, if you buy a single banana at your local coffee shop to eat while sipping your morning joe, it’s subject to the 6 percent state sales tax.

Buy it to go, and it’s untaxed.

Scott’s targets included taxes on hot-button consumer concerns like cable and satellite television and phone service — nothing as prosaic as food.

And though just this portion of his cuts would save the average consumer about $40 a year, they’re going nowhere because the state now has to make up a shortfall of about $1 billion in federal money it was expecting to help fund health care for the poor.

But if any tax laws need straightening out, in the view of many small business operators, it’s the ones that determine when edible items are groceries and when they’re restaurant fare.

And consumers may not know it, but when in doubt, retailers will often just charge the tax.

Carla Reid has operated the Black Dog Cafe in Tallahassee for 17 years – and just had her first state tax audit.

“I was a random pick and they went through and discovered things that I might owe sales tax on, which is where the banana question arose,” Reid said Wednesday.

But it seemed not every question had a clear answer.

“What do you do if someone buys the banana to go, then starts eating it here?” Reid said, adding that the Department of Revenue couldn’t tell her.

“So we charge sales tax on all bananas, in case you should choose to take a bite while in the shop,” she said.

Florida TaxWatch, a nonprofit watchdog organization, has rounded up novel examples of how the state splits hairs.

For instance, marshmallow candy is taxable while marshmallows are exempt, according to TaxWatch’s Halloween candy report.

Ice cream and frozen yogurt isn’t taxed if you buy it in containers larger than a pint, but is taxed if sold in pints or smaller.

“If baked goods are kept warm, they are taxable as ‘hot prepared food,’ ” says a TaxWatch report from Thanksgiving.

But if that same item just happens to be warm from its initial baking, it’s exempt from sales tax, the report says.

And cut-up fruit in a package is not taxed, unless the package also includes a plastic knife and fork.

Like most states, the general idea is that groceries aren’t taxed but food you eat in a restaurant is, according to Kurt Wenner, TaxWatch’s vice president of research.

“Of course, wherever you run into blurred lines is where you get into trouble,” Wenner said. “For instance, there’s always the question of what is a ‘grocery’ and what isn’t. So this is a problem, both for the state and for the retailers.”

More than many states, Florida depends on “transaction” taxes such as sales tax because the Sunshine State doesn’t levy a personal income tax, Wenner said.

Florida, of course, has plenty of company when it comes to confusing taxes.

New Yorkers were up in arms a few years ago when revenue officials began enforcing an obscure tax on sliced bagels.

And the head-scratchers extend beyond the realm of food. Or at least human food.

In recent years, Florida lawmakers decided to exempt cement mixing drums and prescription diet pet food from the sales tax.

So if you’tre a business owner, ask for guidance when needed, advises Mark Zych, director of technical assistance and dispute resolution for the Florida Department of Revenue.

The department this week released a report showing state tax collections for April came in above estimates, including nearly $2.4 billion in sales and use tax — $36.5 million more than expected.

As if it weren’t complicated enough, cafe owner Reid also pointed out that the state uses a “bracketing” system that rounds up or down the tax on specific sales.

For example, a sale of 34 cents to 50 cents is taxed 3 cents; a sale of 84 cents to $1.09 is taxed 6 cents, according to a chart on the Department of Revenue’s website.

“So I ended up owing money on bracketed sales,” Reid said. “When I asked how I program my computer for bracketing, they suggested I hire somebody.”

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