New Sales Tax Takeaway

As many of you already know Maine has substantially changed its sales tax rules regarding food. It’s no longer as straight-forward as groceries (non-taxable) and prepared food (always taxable). The legislature, in its infinite wisdom, now regards some groceries as taxable. The new name for non-taxable food is “grocery staples.”

At our meeting on January 12th one of the members asked how this affects cheese makers because she had heard different things from different people. I promised to look into the question and try to digest the information available.

Attached are two PDFs. One contains the five pages that apply to groceries among the entire revised Sales Tax Reference Guide (linked in its entirety here).

The other document is the revised Instructional Bulletin Number 12 (linked here) for Retailers of Food Products.

There is also a shorter FAQ type document (“Supplemental Information“) based on questions already submitted to the State about the changes.

I recommend reading the Instructional Bulletin and the Supplemental Information because they are more detailed and easier to digest. Be aware that there is now a taxation distinction between “grocery staples” that are altered by the retailer themselves. For example a dairy that mixes chocolate syrup into a bottle of milk to make chocolate milk is considered the SAME as a coffee shop that squirts coffee syrup into a cup of milk they poured from a carton.

There is a PowerPoint presentation meant to summarize the changes in Taxable Food Products (linked here — be warned that it is HUGE and may take a while to download).

Finally, because there is STILL some ambiguity in the Instructional Bulletin, I called the Maine Revenue Service (MRS) Sales Tax Division (207-624-9693). I spoke to Laura Larrabee who then consulted with her boss, Ed Lowell, to clarify the items below.

FYI: Sale Tax (where applicable) on grocery items are 5.5%; sales tax on Prepared Foods is now 8%. This review is meant to cover “Grocery Staples” that would be sold by a cheese maker. If you also sell Prepared Foods there is another Instructional Bulletin (27) that covers Prepared Food.

TAKEAWAY ITEMS FOR CHEESE MAKERS AS I UNDERSTAND THEM

ITEM 1: Remember that sales tax applies ONLY to retail sales (such as Farmers Markets). Your wholesale sales of any foods are still exempt.

ITEM 2: “Cheese” and “Yogurt” are specifically listed as exempt from sales tax as “Grocery Staples”. There had been a question about cheese that is sold as a collection of slices or chunks. According to the MRS as long as pieces of cheese of one type is packaged together it is still considered “Cheese” and therefore is exempt.

ITEM 3: There is some ambiguity about FLAVORED yogurt, however. According to MRS if yogurt (flavored or plain) is sold in “bulk” (one quart or more to a container) then it is exempt. FLAVORED yogurt sold by the producer in smaller containers (less than one quart) is taxable. Plain yogurt in smaller containers is exempt.

ITEM 4: A mix called a “DIP” is taxable. A mix called a “SPREAD” is exempt. A cheese SPREAD, flavored or plain, is exempt. Examples: “Pimento Cheese Spread” is exempt; “Chili Cheese Dip” is taxable.

ITEM 5: All ice cream, ice yogurts, and ice milks of whatever size packaging is taxable.

ITEM 6: “Confections” are taxable, but they are defined as having SUGAR or equivalent sweetener as the FIRST item in the ingredient panel.

ITEM 7: Beverages focus on “Soft Drinks” (which are defined as NOT containing milk) being taxable. Fluid milk is considered a “grocery staple” and thus exempt, but if the producer flavors the milk beverage then it must be “bulk” (one quart or more) to be considered exempt.

The MRS also told me that all retailers, even if they don’t believe they sell any taxable items, must be registered with the Sales Tax bureau.

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