Spotlight on tomorrow's tax cuts: the grocery tax

When you head over to the supermarket tomorrow, how do you know how much you're going to pay in sales tax? Let's say you push the buggy up to the checkout counter with a six pack of Old Milwaukee (well, not tomorrow since it's Sunday), a plate of hot boudin you got from the deli, a bag of dog food, and a pecan pie made at the store (this is starting to sound like the woman in front of me this morning). You're going to be pretty disappointed with the receipt, because you won't be getting any benefit from the new tax cut that goes into effect tomorrow.

This is more than you're probably ever going to want to know, but beginning tomorrow, the state will begin charging a different rate of sales tax on "food and food ingredients" than that which is levied on all other items you toss into the buggy. How are you going to determine what is charged at the reduced rate? That depends on what it is and where/how it's made. Here's the language straight out of the code:

Ark. Code Ann. §26-52-317: Beginning July 1, 2007, in lieu of the gross receipts or gross proceeds taxes levied on food and food ingredients under §§ 26-52-301 and 26-52-302, there is levied a tax on the gross receipts or gross proceeds derived from the sale of food and food ingredients at the rate of two and seven-eighths percent (2.875%)... (don't forget the extra 1/8 cent tax dedicated by the people for natural resources/Dept. of Parks & Tourism/Game & Fish)

What is the definition of food and food ingredients? It's defined as "substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. “Food and food ingredients” does not include an alcoholic beverage, tobacco, a dietary supplement, or prepared food.

How are the exclusions defined?
“Alcoholic beverage” means a beverage that is suitable for human consumption and contains one-half of one percent (0.5%) or more of alcohol by volume;

“Dietary supplement” means any product, other than tobacco, intended to supplement the diet that: (A) Contains one (1) or more of the following dietary ingredients: (i) A vitamin; (ii) A mineral; (iii) An herb or other botanical; (iv) An amino acid; (v) A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or (vi) A concentrate, metabolite, constituent, extract, or combination of any ingredient described in this subdivision (b)(2)(A), and is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and (B) Is required to be labeled as a dietary supplement, identifiable by the “Supplemental Facts” box found on the label and as required pursuant to 21 C.F.R. § 101.36, as it existed on January 1, 2007;

“Prepared food” means: (i) Food sold in a heated state or heated by the seller; (ii) Two or more food ingredients mixed or combined by the seller for sale as a single item; or (iii)(a) Food sold with an eating utensil provided by the seller, including a plate, knife, fork, spoon, glass, cup, napkin, or a straw. (b) As used in this subdivision (b)(4)(A)(iii) “plate” does not include a container or packaging used to transport the food. (B) “Prepared food” does not include food that is only cut, repackaged, or pasteurized by the seller, or eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer to prevent food borne illnesses as recommended by the Food and Drug Administration in Chapter 3, Part 401.11 of its Food Code as it existed on January 1, 2007;

“Tobacco” means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.

There's your crash course in the "grocery" tax cut going into effect tomorrow. The reasons for the definitions are numerous but are based on the notion that this particular tax cut is designed to reduce a regressive burden on necessities. They're also identical to federal definitions and similar to how other states define and levy sales tax on groceries. Don't forget that all items will continue to be subject to the full local tax.

The $121 million grocery tax cut was the largest of nearly $200 million in tax cuts signed into law during this legislative session. It'll save the typical Arkansas family $234 annually on its grocery bills. The Associated Press has wall-to-wall coverage of tomorrow's tax cut:

Examples of items affected by the cut in Ark.'s grocery sales tax
Ark. grocery tax cut: There's always room for Jell-O
Tax changes highlight list of new Ark. laws taking effect
Ark. grocery tax cut a relief for all, but a headache for grocers