Your Jack-O'-Lantern Is Taxable
According to one story, the New York State Department of Taxation and Finance came down on a store manager for not collecting sales tax on the pumpkins the store was selling. "Why should I collect taxes? I'm selling food — not taxable in New York," said the manager.
"Come on," said the NYSDTF, "we all know that no one is cooking and eating those pumpkins. They're carving them for Halloween."
The manager shrugged. "All I know is that pumpkins are food. If people choose to do something else with them later, that's none of my business."
Tax rulings are complicated, and the logic may not be clear at first.
It's just speculation the conversation went like that. But what is 100% certain is that the NYSDTF truly addressed this for any entity selling pumpkins in New York. In 2010, the Office of Counsel issued Advisory Opinion TSB-A-10(30)S, which countered the store manager's arguments. It noted that the food exemption specifically stated the tax exemption was for food "sold for human consumption." Pumpkins used for pies, breads and cookies were typically the sugar, deep red and golden cushaw varieties, among others. (It was unclear if the NYSDTF keeps a food authority on retainer.)
However, the big orange pumpkins used for carving are the Connecticut field variety, not considered the best variety for cooking. Therefore, concluded the NYSDTF, they are subject to the state sales tax. It wrote, "Thus, decorative and carving pumpkins and other decorative gourds whether sold at supermarkets, farm stands, nurseries, or other businesses, are not sold as food, and constitute tangible personal property subject to sales tax under section 1105(a) of the Tax Law."
Of course, this only applies to New York, but there's a good chance something equally strange can be found in your state's tax code.
A previous legal incursion into botany.
This was not the first time the government stepped in to rule on produce. Indeed, the U.S. Supreme Court ruled on the differences between fruits and vegetables in Nix v. Hedden in 1893. At that time, duties were imposed on vegetables but not fruits. The court ruled against the Nix company, which imported tomatoes, putting tomatoes firmly in the vegetable category.
Wrote the court, "Botanically speaking, tomatoes are the fruit of a vine, just as are cucumbers, squashes, beans, and peas. But in the common language of the people, whether sellers or consumers of provisions, all these are vegetables which are grown in kitchen gardens, and which, whether eaten cooked or raw, are, like potatoes, carrots, parsnips, turnips, beets, cauliflower, cabbage, celery, and lettuce, usually served at dinner in, with, or after the soup, fish, or meats which constitute the principal part of the repast, and not, like fruits generally, as dessert."
NPR has published a nontechnical analysis of the court's decision on tomatoes.
Yes, these cases are entertaining, but there's a sober lesson here as well: Tax rulings are complicated, and the logic may not be clear at first. All the more reason to be careful and keep in close touch with us.