New Meals Tax Guidance Has Republicans Calling Foul, Grocery Stores Scrambling
CT News Junkie, Sept. 13, 2019
By Christine Stuart
Republican lawmakers say Connecticut residents should prepare to pay more at the grocery store starting on Oct. 1, based on guidance from the Department of Revenue Services.
The state budget approved with only Democratic votes included language that increases the sales tax on certain foods and drinks. However, until now it was unclear exactly what items might qualify for that higher 7.35% sales tax.
It was clear as part of the budget discussions that the higher 7.35% tax would apply to food purchased at restaurants, but it was less clear what other establishments and which foods would qualify for the higher tax.
The Department of Revenue Services issued guidance this week to clear up any confusion over which foods qualify for the higher sales tax at the grocery store.
The higher tax will apply to prepared meals, which were previously taxed at 6.35%, but it will also apply now to donuts, muffins, rolls, or bagels in quantities fewer than five.
Senate Republican Leader Len Fasano, R-North Haven, said that means if you buy six rolls then you won’t be taxed.
The new higher tax will also apply to things such as bags of lettuce or green-based salads sold in containers of 8 ounces or less, and on meal replacement bars or items sold as part of a family pack of meals.
The higher sales tax would also apply to single-serve drinks sold at soda fountains. The higher tax won’t apply to whole loaves of bread or whole cakes and pies because those are considered “bulk food items.”
“However, whole cooked chickens, whole racks of ribs, or trays of pasta, when sold by eating establishments or grocery stores, are considered food items for immediate consumption and are subject to sales and use taxes,” the Department of Revenue Services guidance states. “Items sold in quantities or portions larger than those specifically noted in the lists above are considered bulk sales. Therefore, they are not generally taxable meals.”
Rep. Vincent Candelora, R-North Branford, said when the idea of taxing groceries was floated, “it fell like a lead balloon.”
He said people realized a grocery tax would punish the poor.
A proposal to tax groceries at 2% was floated quietly by Gov. Ned Lamont, but never got off the ground.
The Commission on Fiscal Stability and Economic Growth first recommended it after learning Connecticut misses out on about $450 million in taxes a year by not taxing groceries.
“It is simply a money grab,” Fasano said.
Candelora said they were told it was only going to apply to prepared meals if you go out to a restaurant, but by adding the word grocery store into the language it changed everything.
“We’re going to see items that people generally purchase go from 0 to 7.35%,” Candelora said. “What is this policy about? What are we achieving?”
He said it can’t be about healthy eating because it includes things like salads, lettuce, soups, smoothies, cooked chickens, and more. He said he’s surprised that this is the way the Department of Revenue Services interpreted this language. He thinks it will raise far more revenue under this guidance than was included in the state budget, which is about $100 million over two years.
He said grocery stores will be left scrambling trying to figure out that four muffins might be taxed but six muffins may not be taxed.
Candelora pointed out it’s only an advisory opinion that grocery stores and convenience stores will now have to interpret it.
“At best this was sloppy work and it was reckless,” Candelora said. “At worst, it was very purposeful.”
Closing the deficit back to top
Max Reiss, Lamont’s communications director, said Gov. Ned Lamont was tasked with closing a $3.7 billion budget deficit and he did that “without an increase to tax rates all while ensuring that the safety net remains intact for the most vulnerable in our communities.”
“It’s apparently easier for the GOP to criticize rather than do the work of presenting their own budget,” Reiss added. “Connecticut will have the largest rainy day fund in history and this budget maintains and grows our reserves, providing reliability and predictability for our taxpayers, businesses, and those looking to invest in our state well into the future.”
Candelora said grocery stores were already taxed for the prepared meals they were providing.
Grocery stores are working on figuring it out before Oct. 1.
“Grocery retailers are working toward compliance on hundreds of UPC’s that need to be changed in their point of sale systems,” Wayne Pesce, president of the Connecticut Food Association, said. “I’m not sure that any of us realized the breadth of items covered under the new law until DRS issued guidance. Consumers are sure going to be surprised about additional 1% tax on staple items such as rotisserie chicken, bagels and single-serve beverages.”
Sen. Cathy Osten, D-Spraque, who co-chairs the Appropriations Committee, said she doesn’t believe the Department of Revenue Services guidance is accurate because it was never their intention to tax groceries at a higher rate.
“The DRS guidance is very broad,” Osten said. “It does not say in the DRS guidance that a bag of lettuce will be taxed. It does not say that. That’s certainly something that has been extrapolated into but it is not true that the intent nor was it ever discussed that groceries would be taxed.”