Patterico's Pontifications

6/21/2007

Tax Tip of the Day: Always order your coffee ‘to go’ in California

Filed under: General,Law — Justin Levine @ 3:05 pm

[posted by Justin Levine]

So I was at the Coffee Bean & Tea Leaf in Manhattan Beach yesterday, when I had this revealing conversation with the cashier -

ME: I’d like a regular size Black Forrest ice blended please.

CASHIER:   Will that be for here? Or to go?

ME:   To go please.

[After waiting a beat...]

ME:   Um….excuse me. I was just thinking [usually a bad idea in my case, but it happened despite my best efforts to prevent it], why do you bother to ask people if the order “to go” or not? I mean, you serve the drinks in the same paper cups and plastic containers regardless of if they drink the coffee here or elsewhere, right? So, why spend the energy to ask people if their drinks are “to go”?

CASHIER:   We have to charge them tax if they drink it here.

ME:  I beg your pardon??

CASHIER:   There is a tax if you drink your coffee on the premises. But there’s no sales tax if its to go.

ME:   You’re joking.

CASHIER:   Nope.

ME:   You mean even if I actually drink most of it here, as long as I tell you its “to go”, then I won’t get charged sales tax??

CASHIER:   Yep.

ME:   That’s crazy.

CASHIER:   I know. [Another coffee store that will go unnamed] doesn’t even bother to ask their customers. They just assume that none of their orders are “to go” and charge everyone the tax.

ME:   Wow. Thanks for asking then. It’s a good thing I actually do want this to go. I wouldn’t have known to give the right answer otherwise.

CASHIER:   No problem.

ME:   Tax law sure is crazy in this state.

[More PDF info here.]

45 Responses to “Tax Tip of the Day: Always order your coffee ‘to go’ in California”

  1. Actually, I think it’s that way in most states. Here in Ohio, I always ask for items “to go” unless I’m consciously planning to sit down and eat/drink. We get charged tax as well; the whole thing is rather annoying.

    Calico Jack (41932b)

  2. Not in Texas. The sales tax applies whether it’s to go or for consumption in the store.

    DRJ (2d5e62)

  3. Hm. I didn’t know people didn’t know that. I’ll have to spread the word!

    David N. Scott (71e316)

  4. Hahaha, Wuzzadem! You really had me going there for a moment.

    Hey. Where are the pictures?

    In Italy, they charge you more if you’re going to drink coffee or anything else at the bar or a table.

    Dan Collins (1e2e08)

  5. To parse this tax law – it is supposed to be taxed when the coffee is served in a cup that needs to be washed! I guess it’s the use of water as opposed to trash pickup, landfill etc. Go figure.
    Starbucks does not ask – they serve everything in paper and consider it “take-out’

    Autone (b99ba3)

  6. Where I live any take out food or drink is taxed at a higher rate to offset extra trash disposal costs for the bag and other stuff that a eat in order would not require.

    SlimGuy (658d0b)

  7. My wife is a manager at CBTL. It’s a big deal for them to train their cashiers to ask whether it’s to go or not. They would rather not pass the cost along to their customers if they don’t have to.

    By the way, this policy is no particular secret.

    Fritz (e8fb57)

  8. Interestingly, the link also states that cold Subway sandwiches and hot pastries are nontaxable, when sold to go. That tray will cost you 50 cents.

    calwatch (56fe4e)

  9. DRJ’s right about the Texas approach, of course, but our state’s sales tax law does have its quirks. For example, under section 151.314, “Food products for human consumption are exempted,” but “food products” do not include tonics, dietary supplements, candy, or “packaged soft drinks.” But if your drink is 50% or more (by volume) made from fruit or vegetable juice, it is a food. And if the food is “ready for immediate consumption in or by restaurants, lunch counters, cafeterias, vending machines, hotels, or like places of business or sold ready for immediate consumption from pushcarts, motor vehicles, or any other form of vehicle,” then it’s taxable. Of course, if your doughnut is served with a plate or eating utensil, then it also becomes taxable (unless, maybe, it’s sold by your school’s PTA or in a nursing home). And in some circumstances, the candy bar that someone sells you on his twentieth birthday becomes taxable when it wouldn’t have been on the preceding day. Unless you’re in prison. Or something like that.

    Beldar (98ae2d)

  10. Yeah, Mountain Dew is subject to the sales tax in Pennsylvania as well, while genera; food items are not. Since Mountain Dew is an excellent source of two of the four main food groups (sugar and caffeine), the idea that it isn’t considered a legitimate food is just plain wrong!

    Dana (3e4784)

  11. If you order goods, etc from many states via a web site (or by phone) and they do not have a store in your state, you do not get charged sales tax. Apparently, as long as the item is shipped out of state, the sales tax charge is waived.

    Sabba Hillel (b3a959)

  12. In Ohio, as I understand it, food is not taxable, but service is. What you are taxed on if you buy eat-in is use of the premises. Soda is not a food. Bizarre.

    HerrMorgenholz (cd134a)

  13. Re #11-

    In CA, if you order something from out of state and you are not charged tax on it, you are supposed to pay the tax yourself. Of course, no one does.

    MartyH (52fae7)

  14. Yes, it’s not that the tax isn’t due, just that the vendor isn’t required to collect it. In VA, there’s a special Consumer’s Use Tax form you’re supposed to file with your state income tax.

    SDM (d3c1b2)

  15. California is totally nuts.

    Uh, wait a minute while I check out Maryland law….

    Attila (Pillage Idiot) (68fd1f)

  16. You seriously didn’t know that? Wow. That is kinda crazy. I’m pondering how you could have avoided knowing that fact.

    Seixon (baa852)

  17. France has a very similar tax structure for restaurants/cafes/fast-food joints: if your meal is “to go”, it gets charged at the “low” sales tax rate for grocieries, 5.5%. If it’s to eat on the premises, it gets charged at the higher sales tax rate of 18.6%, which applies to everything else.

    Well, I say “has”, but those numbers are from when I was growing up in France about 15 years ago. The rates may be higher by now — I wouldn’t be at all surprised if they are. Ah, the joys of socialist governments…

    Robin Munn (0eb2b2)

  18. C’est le difference between buying food and being provided a service. Which is pretty funny considering how much “service” you get at a fast food joint.

    Seixon (baa852)

  19. [...] TIP OF THE WEEK: Order coffee “to go” in [...]

    Don Surber » Blog Archive » The week that was (78dd76)

  20. (Chris Farley voice) Surprised you didn’t know that.

    CraigC (908a0d)

  21. California used to do the same thing with prepared food. “Take out” food wasn’t taxed, but sit-down food was, regardless of the percentages of each. Didn’t have sales tax on gasoline or periodicals or candy. Then after Prop 13 they jacked up all the sales taxes and cut out most of the “loopholes.” Didn’t know there was still a take-out exemption, though. Do you suppose St***ucks is pocketing some of that sales tax?

    Kevin Murphy (0b2493)

  22. To Kevin:

    Calif tax rules were that if a business over-collected sales tax from patrons (even by accident), the State was entitled to all of it collected under that title (or so it was when I tried to own a restaurant a decade ago).

    It may be that the large chain you alluded to calculated it is easier to over-collect for the State (which does not come from out of their own pocket), than to try to train employees to recognize the difference (and possibly make mistakes that does come out of their pocket).

    When it comes to money, the government rarely believes in “innocent mistakes” if it is on the short end.

    Roy in Nipomo (056cbc)

  23. And be careful which candy bar you order with the coffee. In some states, your candy bar will be exempt from sales tax if it contains flour – like a Twix Bar, for example!

    T J Sawyer (ea0565)

  24. Different states handle this differently, but I think the main distinction between eat-in and carry-out is that eat-in triggers the restaurant tax. This can be higher than the normal sales tax, because the politicians figure it’s more tourists and out-of-towners who will pay it (as with hotel and rental car taxes).

    As others have said, take-out can be classified as groceries, and in most states groceries are tax exempt. (Depending on the item: if memory serves, New York taxes regular marshmallows because they’re candy, but not mini-marshmallows, because they’re a baking item.) The last time I checked here in Maryland, fast food was taxed the same 5% whether you ate in or carried out, but the order taker still had to ask, because the restaurant has to keep the “restaurant tax” and the “sales tax” amounts separately.

    PJ/Maryland (cc35e8)

  25. I’ve never heard of this before, what is the tax actually for?

    Most states have a regular sales tax that applies to almost everything(except usually groceries), is this an extra tax on top of sales tax or is it something different?

    Also is this limited to california, or is it common in other states?

    consumer (0ccba6)

  26. I’ve known this for a long time. Most people are probably most offended at the principle of having to pay a tax on something just because you drink it inside the premises rather than outside.

    But that 8% is pretty paltry compared to the typical pricing structures in places like France or Italy. There you have completely separate price lists whether you order “for here” or “to go”.

    And I’d gladly spend the extra dime to get a coffee in a real cup that insulates the heat better and adds to the experience. Save the paper cups for the three-year-old birthday parties.

    Greg Sherwin (b7944a)

  27. This might explain why, when the company that goes by SBUX on Wall Street (is there any reason we’re not calling it by name–some sort of a Voldemort thing?) first came to Texas, they used to offer “for here” coffee in a mug, but they seem to have abandoned that after a while. If the price is the same either way, it makes sense that they’d see no reason to keep a supply of glass mugs around or use water and employee resources to wash them.

    Plus, these days, it would be ugly if you had to print the Lawyer Phrase–Caution, the beverage you are about to enjoy is extremely hot!–on the side of the glass mugs. ;-)

    As others have said, the sales tax is the same in Texas no matter what, but I’ve been to other states (Vermont comes to mind) and felt fleeced by that “restaurant tax.” Sure makes visitors feel welcome…

    Kev (400ac2)

  28. I gave up trying not to pay take-out sales tax in California years ago. No one who works in fast food knows or understands the law *or* believes me when I tell them.

    Of course, if some large organization were to do an expose’ on the topic, the legislature would just change the law anyway. I guess it’s like the Queen’s ability to dissolve Parliament–she’d only be able to do it once!

    Darren (82ed24)

  29. Saturday Readings…

    Have you ever received a gift that was so incongruous that you were stymied as to why the giver had chosen that particular thing just for you? Did you make your embarrassed thank you and then promptly tossed it, gave it to charity or, mercy sakes alive…

    'Okie' on the Lam (e2cef7)

  30. Uh, tax? For here, to go? Taxes? :)

    Denny Gill
    Chugiak, Alaska
    (“Alaska:” Athabascan word meaning “great land of no taxes,” translation: mine.)

    Denny (44b3f8)

  31. [...] Posted by TheShot on 23 Jun 2007 at 01:39 pm | Filed under: Consumer Trends, Café Society When grumbling over tax law conspiracies, some people get steamed over corporations that avoid paying U.S. taxes by incorporating in Bermuda. Others want to start a tax revolt because they might have to pay an extra dime to drink their coffee out of something other than a paper cup: Patterico’s Pontifications » Tax Tip of the Day: Always order your coffee ‘to go’ in Californ…. [...]

    Espresso News and Reviews - TheShot.coffeeratings.com » Tax Tip of the Day: Always order your coffee ‘to go’ in California (88c033)

  32. Same in Illinois. It’s a 1% tax if it’s a for here order. I had an arguement with the General Manager when I was working for Panera Bread. She said it was money that goes to the company because we have to pay for water when we wash the dishes.

    Jason (b8b507)

  33. I’ve had the same issue at Subway, and it really makes me mad. Not only that, but one nearby Jack-in-the-Box sells Big Burgers for $1.59, and another has them for $1.29. And, here’s the thing… I keep forgetting to go to the second one instead!

    TLB (cc42f6)

  34. If I remember correctly, in NY miniture marshmellows are considered a cooking ingredient and not subject to sales tax, while the roasting-over-a-campfire size are considered candy and therefore subject to sales tax.

    ck (fd2134)

  35. Demacrats are always preposing a tax on something to pay for some rediclous pet project of theirs and rmember a tax on tea was one of the reasons for thr american revolution

    krazy kagu (484aa9)

  36. Well in Montana there really is no sales tax at all. but in Wyoming they dont even charge sales taxes on food items.

    Jasmine (f49f72)

  37. California has a STATE %, around 6-7, and local gov’t entities can add to that to total 8.5 or 8.75. It seems to be around 8.25% mostly – San Francisco has some entertainment or hotel or something extra, I think.

    Ready-to-eat is taxed as semi”non-food”, I think, as if it were a luxury, and not prepare-at-home food – some conceptual guide, but maybe not codified as such. Maybe your coffee had some extra local restaurant tax. I’ve answered either way, and the price was the same at Burger King up in San Fr. Bay area. hunh.

    I am trying to figure out if 2-liters of soda, or other grocery sodas, are exempt. Some Walgreens charge tax, some do not. One manager was adamant it was taxable, but the Calif. Franchise Tax Board, I found ONCE, said it was exempt, but I can’t find it again. I saw a reference to a Senate Bill that died in committee.

    Piet Van Allen (713632)

  38. This is an odd thing I found:

    This is the html version of the file http://www.boe.ca.gov/members/yee/taxsrvs/files/2006/Non-profit_Fundraising.pdf.

    BETTY T. YEE -
    ACTING MEMBER
    STATE BOARD OF EQUALIZATION

    Sales of Food, Beverages, and Meals
    Q:
    Should a non-profit or exempt charitable organization charge tax on sales of food or
    beverages not included in the ticket price at events?
    A: It depends. The sales of food and beverages by certain organizations in certain circumstances may
    be exempt from tax. For other organizations, the taxability of sales of food and beverages depends
    on a number of factors including whether it is sold in places where admission is charged, whether it is sold where “dining facilities” are provided, and the type of food and beverage provided. (See
    BOE Publication 18, Nonprofit Organizations, for a more detailed discussion.)

    The following provides a general guide as to when sales of food or beverages are subject to tax:
    Food or Beverage Items

    [I wonder if "soda" is in an opened bottle, not in a grocery-type setting, but like at Subway Sandwich Shop...]

    Carbonated beverages, such as soft drinks and “fizzing”(carbonated) bottled water
    Sales Tax? Yes
    Non-carbonated beverages, such as fruit juices and “non-fizzing” bottled water
    Sales Tax? No
    Hot food sold above room temperature, such as hot sandwiches, hot soup, and hamburgers.
    Note: Individual hot drinks and bakery goods are not taxable.
    Sales Tax? Yes
    Cold food sold “to-go,” such as candy and potato chips sold when there’s no on-site dining facility
    Sales Tax? No
    Cold food served “sit down,” such as a cold sandwich sold where there is an on-site dining facility
    Sales Tax? Yes
    Hot food items served in combination packages, such as hot soup sold with a cold sandwich and a cookie
    Sales Tax? Yes
    Cold food items served in combination packages, such as a cold sandwich sold with potato chips and fruit juice
    Sales Tax? No
    Carbonated beverages served in combination packages, such as a soda sold with a cold sandwich and a cookie.
    Note: Only the soda is taxable.
    Sales Tax? Yes

    Piet Van Allen (713632)

  39. Definitive Coffee Tax, fron the [San Jose?] Metro paper:

    Cuppa Coffers

    Starbucks
    Boston Cappuccino Party: California customers of Seattle-based coffee giant Starbucks leave a paper-cup trail of uncollected sales taxes, which by law should be charged for all hot coffee consumed on the premises.

    Photo by Kirk Schroeder

    Is Starbucks contributing its fair share to local communities? Reporters’ observations indicate the coffee giant doesn’t pay as much local sales tax as it should. The company calls it an ‘oversight.’

    By Michael Learmonth

    ‘DECAF GRANDE NON-FAT LATTÉ!” announces the frontman at Starbucks toward four young, high-energy coffee schleppers, white sleeves rolled up, pulling shots from the espresso machines into paper cups. Sleepy-eyed patrons assume the classic coffee pose: hunched back, elbows on the table, both hands holding the piping morning elixir in paper cups, as if in prayer.

    A California highway patrolman, in leather jacket and jackboots, strikes a rakish pose, sipping from his disposable cup on the patio within eyeshot of his Kawasaki 1000. He’s reading a copy of Michael Connelly’s The Poet. On my nickel, I figure.

    Apparently, at this moment at 10am in Starbucks at Hamilton Plaza in Campbell, only one customer has specified “for here.” He sits at the window, nose in a paper, an empty porcelain espresso cup to his side. “It does not taste the same in paper,” he says, sneering at my watery brown Americano. “For you, it probably doesn’t matter.”

    The rest of the coffee-sippers, three inside and four out, are sipping from paper cups. That means they are “takeout” customers and were not charged the 7.75 percent sales tax on their coffee. In not charging these customers sales tax, even though they are consuming their coffee on the premises, Starbucks is treading on a touchy piece of California tax law that states a product “suitable for consumption on the seller’s premises” should be taxed.

    “The rule is basically that coffee on the premises is taxable,” says Johan Klehs, vice chair of the State Board of Equalization. “Coffee to go is not taxable.” The catch is that once the customer takes that first sip in the store, on the way out or before adding cream, the coffee becomes taxable in the eyes of the state.

    “If you read the tax guidelines, they are a bit vague,” says Teri Hope, owner of Los Gatos Coffee Roasting Co., who charges sales tax for every cup of coffee regardless of whether it is a takeout order. “I always assume if my beverage is hot and ready to drink that it is a taxable item. Even if the coffee is ‘to go,’ they’re probably sipping it as they walk out the door.”

    Piet Van Allen (713632)

  40. http://www.boe.ca.gov/pdf/pub61.pdf

    Okay…SODA is tax-free if bought with food stamps! I am wrong. Coffee is below, too.

    • FOOD PRODUCTS — Sales of food for human consumption are generally exempt from tax unless
    sold in a heated condition (except hot bakery items or hot beverages, such as coffee, sold for a
    separate price), served as meals, consumed at or on the seller’s facilities, ordinarily sold for
    consumption on or near the seller’s parking facility, or sold for consumption where there is an
    admission charge. The exemption for food products includes snack foods, candy, confectionery, and
    chewing gum. (SECTION 6359)
    • FOOD PRODUCTS SOLD THROUGH VENDING MACHINES — The vending machine operator is the
    consumer of (1) food products, candy and confectionery which sell at retail for fifteen cents or less etc…[edit]
    • FOOD STAMP PURCHASES — When otherwise taxable purchases are made with food stamps, only
    the amounts paid with food stamps are exempt from tax. Amounts paid with forms of consideration
    other than food stamps, such as cash or manufacturer’s coupons, remain taxable. Examples of
    otherwise taxable sales which are exempt from tax when purchased with food stamps, include sales
    of carbonated beverages, food coloring and ice. (SECTION 6373)

    Piet Van Allen (713632)

  41. Thank you!

    Any tips on how to keep money away from the government are welcome!

    For any money you keep is used *for* you and any that goes to the government is used for something you may not approve of, even *against* you!

    Click on my name! See my blog!

    Alice Lillie (de5a83)

  42. Comment 10, Dana said, “Yeah, Mountain Dew is subject to the sales tax in Pennsylvania as well . . .”
    Not exactly. PA sale Tax law is misunderstood and abused so much that MOST stores screw it up in some way and this is one of the most common.
    Warm soft drinks on the Grocery shelf are non-taxable groceries.
    Cold soft drinks in the cooler are taxable “prepared food.”
    I seldom find a grocery store that gets this right.

    Lyle (039579)

  43. [...] Tax Tip of the Day: Always order your coffee ‘to go’ in California [posted by Justin Levine] So I was at the Coffee Bean & Tea Leaf in Manhattan Beach yesterday, when I had this revealing conversation with the cashier – [...]

    Taxes You Don’t Have To Pay, But Do! « The Bay Area Critic’s Backpage (e19371)

  44. [...] Tax Tip of the Day: Always order your coffee ‘to go’ in California [posted by Justin Levine] So I was at the Coffee Bean & Tea Leaf in Manhattan Beach yesterday, when I had this revealing conversation with the cashier ME: I’d like a regular size Black Forrest ice blended please.  [...]

    Taxes You May Not Have To Pay in California « The Best of Bay Area.com’s Blog (2dc949)


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