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Bonehead tax breaks draining state budget

The Bakersfield Californian | Thursday, May 8 2008 6:37 PM

Last Updated: Thursday, May 8 2008 6:41 PM

For here or to go? How many times have we been asked that? Every time we buy food at a fast-food restaurant, we are asked: For here or to go?

I thought I knew what that meant that you would not be charged sales tax on the to-go food.

But lately it only seems to mean: Do you want your food on a plate or in a bag?

No matter what answer I give, I am charged sales tax.

OK, maybe the tax rules changed. I shrugged off my cheapskate concerns and paid the money. That is until I received a letter from John Young of Bakersfield.

"Within the last several months, I have observed some Bakersfield businesses playing fast and loose with sales tax," Young wrote.

"Many businesses do not actually ring up sales, including tax. They merely open the cash drawer and tend money off the books. Others add too much tax.

"The state can hardly afford these practices on a large scale. The people of California and each individual customer are disserviced with these practices."

I started collecting my own receipts from around town. A couple of examples: When I bought two cold takeout salads from one restaurant, I was charged $1.01 in tax. A salad and two cups of soup carried away from another restaurant included 72 cents in tax.

I checked with the state Board of Equalization, which oversees sales tax collection, and found the mind-boggling "Tax Compliance Tips for Restaurant Managers" that explained:

Sales tax generally applies to food and beverages if they are served for consumption on the premises. If the establishment provides tables, chairs, counters, trays, glasses, dishes and other tableware, the sales are generally subject to tax.

If a restaurant derives more than 80 percent of its gross receipts from food product sales and more than 80 percent of the food sales are taxable, the BOE's "80/80 rule" makes all to-go sales taxable. Sales of carbonated beverages and alcoholic beverages and sales of cold food to-go not suitable for immediate consumption should not be included for purposes of this computation.

Confused yet?

It gets worse.

The "tips" advise that restaurants may make a "special election" with the BOE to separately account for to-go sales of cold food, hot bakery goods and hot beverages for purposes of exempting such sales from tax.

If a location is not subject to the 80/80 rule, then tax does not apply to to-go individual sales of cold food products, hot bakery goods and hot beverages. However, if these goods are sold as part of a combination package with one or more hot food items, tax applies to the entire selling price.

If a combination package sold to-go includes cold food and a carbonated beverage, the portion of the selling price that represents the carbonated beverage is subject to tax.

Good grief!

A counter clerk would have to be a certified public accountant to accurately compute the exemptions to this tax.

And for that reason, according to a BOE investigator, applying sales tax to restaurant food is among the most misunderstood and improperly imposed taxes.

Rather than even trying to sort out the exemptions, many restaurants that offer both dine-in and takeout services apply the tax to all transactions. It's easier. Just charge the tax and turn the proceeds over to the state.

Some restaurants that are tempted to shortchange the state have little to fear.

Reportedly, the BOE is so short-staffed that it audits only about 2 percent of the state's businesses.

Customers rarely bat an eye at the tax. They, too, are confused.

So why bother with these sales tax exemptions?

No one OK, John Young and I are exceptions even notices. Apply the sales tax to all restaurant food sales.

It's just one of many tax exemptions my favorite is the scam involving the tax applied to the sale of yachts that drain off money needed to close an estimated $20 billion state budget gap. (That's right, the Governator now says the shortfall is $20 billion.)

With spending cuts alone unable to close the gap, Democrats want more taxes applied to more things, while Republicans want more tax exemptions applied to more things.

A long hot summer budget standoff looms.

Meanwhile, how about just eliminate some of the bonehead exemptions like the incomprehensible ones for take-out food?

E-mail Dianne Hardisty at dhardisty@bakersfield.com.