NCPA - National Center for Policy Analysis

Should Take-and-Bake Pizza Be Taxed?

January 28, 2014

States are split on whether uncooked pizzas should be subject to sales tax, says USA Today.

Should consumers be charged sales tax when they purchase food to cook at home? Many states are considering the question, as food sold in grocery stores is not taxed, while ready-to-eat food served in restaurants is taxed. Into which category does a take-and-bake pizza fall?

As an example of how much sales tax varies depending upon one's interpretation of what is taxable, 21 states tax repair services, 19 tax landscaping, 18 tax cleaning services, six tax lobbying, three tax legal services and two tax medical services.

Twenty-four states currently follow the Streamlined Sales Tax Governing Board's (SSTGB) taxing guidelines, but they cannot agree on the proper way to tax uncooked food sold in restaurants.

  • Prepared food (and thus taxable food) is defined by the Streamlined Sales Tax Governing Board as food in a "heated state," has at least two ingredients that are combined by the seller, or is sold with utensils.
  • Arkansas, Kentucky, Michigan, New Jersey, North Carolina, Rhode Island, Tennessee, Utah, Washington, Wisconsin and West Virginia all consider take-and-bake pizza to be prepared, taxable food. Indiana, Iowa, Minnesota, Nebraska, North Dakota, Nevada, Vermont and Wyoming, on the other hand, disagree.

Why has the issue sparked so much controversy? The Tax Foundation points to the shrinking sales tax base, from 60 percent of the economy in 1960 to 30 percent today. As revenue dries up, states are looking for ways to expand the tax.

Right now, the SSTGB has been unable to come to a decision, and the Board is considering allowing the states to decide the issue for themselves.

Source: Elaine S. Povich, "States Try to Raise Some Dough by Taxing Uncooked Pizza-to-Go," USA Today, January 20, 2014.


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