Maine Taxpayers Must Stomach New Snack Food Taxes

Erik Wallin
February 17, 2016

New Year’s Day 2016 brought numerous indirect tax changes to the state of Maine. These changes were varied and intended to complement reductions in the state’s income tax. One of the biggest changes that became effective January 1, 2016 relates to the sale of food and now there are new snack food taxes.

In the state of Maine, sales of “grocery staples” are generally considered exempt. In 2015, the definition of “grocery staples” was fairly self-explanatory with a few exceptions for items such as bottled water, ice, candy, and alcohol.  The definition seemed fairly commonsense.

What is No Longer Exempt as a ‘Grocery Staple’

However, on January 1, 2016, the definition of “grocery staple” was narrowed to exclude various “snack” foods that many people would generally buy at a grocery store. The term “grocery staples” is now much less intuitive. Starting in this new year, the following food and beverages sold for consumption, without further preparation, are excluded from  the definition of “grocery staples” and therefore subject to sales tax, even when sold in bulk quantities:

  • Confectionery spreads, such as marshmallow fluff and crème, and chocolate spreads
  • Powdered and liquid drink mixes except powdered milk, infant formula, coffee and tea
  • Salads (not prepared by the retailer)
  • Supplemental meal items such as corn chips, potato chips, crisped vegetable or fruit chips, potato sticks, pork rinds, pretzels, crackers, popped popcorn, cheese sticks, cheese puffs, and dips
  • Fruit bars, granola bars, trail mix, breakfast bars, rice cakes, popcorn cakes, bread sticks and dried sugared fruit
  • Nuts and seeds that have been processed or treated by salting, spicing, smoking, roasting, or other means (does not include peanut butter)
  • Desserts and bakery items, including but not limited to doughnuts, cookies, muffins, dessert breads, pastries, croissants, cakes, pies, ice cream cones, ice cream, ice milk, frozen confections, frozen yogurt, sherbet, ready-to-eat pudding, gelatins, and dessert sauces
  • Meat sticks, meat jerky, and meat bars

New Definitions of Candy and Soft Drinks

In addition to carving out what many consider snacks from the definition of “grocery staples”, the state of Maine has also created new definitions for “Candy” and “Soft Drinks.” The revised definitions are as follows:

Candy is “a preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops or pieces.”

Soft drinks are “nonalcoholic beverages that contain natural or artificial sweeteners. ‘Soft drinks’ does not include beverages that contain milk or milk products; that contain soy, rice or similar milk substitutes; or that contain greater than 50% vegetable or fruit juice by volume.”

These revised definitions also expand the taxability of numerous items that had once been included as “grocery staples.”

It is clear from the items that have been carved from the “grocery staples” exemption in Maine are foods that for the most part could be seen as “unhealthy” (obviously salads and other items are perfectly healthy). Using the power to tax in order to encourage a greater social good is nothing new as there are various examples around the US. It’s worth noting that this is not the first time Maine has tried to tax snack foods (a Snack Food Tax was previously eliminated in January 2001) and only time will tell whether residents will be able to stomach this new tax and it will stick.

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Author

Erik Wallin

Erik Wallin is a Senior Tax Counsel on the Tax Research Team at Sovos Compliance. Erik has been with Sovos Compliance since 2011, and his main areas of focus are on U.S. Transaction Tax Law which includes special expertise in the taxation of technology and the taxation mechanisms that apply throughout the Colorado home rule jurisdictions. Erik is a member of the Massachusetts Bar, has a B.A. from York College of Pennsylvania, a J.D. from New England School of Law, and an LL.M. in Taxation from Boston University.
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