Snack tax repeal vexes local shop owners

One week after the repeal of Maine’s snack tax on items such as popcorn, chips and pretzels, a number of small-business owners said Monday that they were still trying to determine which products are taxed and which ones are subject to the repeal.

As of Jan. 1 a wide variety of snack items such as snack crackers, cookies, doughnuts and chips are no longer subject to a 5 percent sales tax. Soda, candies, gum and breath mints will remain as taxable items in all stores.

However, snacks sold in retail stores that sell food mostly for immediate consumption – such as sandwich and pizza shops with limited grocery offerings – remain subject to the sales tax. In addition, any chips, pretzels or snack bars that are coated with chocolate, yogurt or caramel are also subject to the tax.

The exemptions to the law, some store owners said, have made the new law governing the taxation of munchies hard to stomach.

Christy Morrell, owner of Perry’s Market in Hampden, said she has been confused by the new law and remains unsure which items to tax. Morrell said she has contacted Maine Revenue Services about the problem, but as of Monday had yet to receive an answer. In the meantime, she said, she has opted not to collect tax on any snack item in her store.

“I haven’t been taxing them,” Morrell said of her customers. “I was waiting to get this,” she said as she pored over a state list of taxable and nontaxable items presented to her by the Bangor Daily News on Monday. Morrell added that a few of her customers have questioned her staff about the snack tax repeal, but her employees have had little information for them.

Peter Beaulieu, director of the sales tax unit of Maine Revenue Services, said Monday that several small-business owners have contacted his office with questions about the snack tax. Since the repeal took effect, Beaulieu said, his office has fielded 50 to 100 calls each day from business owners seeking clarifications on the tax law.

“Most of what’s been coming down is about whether they continue to tax or not,” Beaulieu said. Much of that confusion, Beaulieu said, comes from business owners who are unclear as to whether they fit the profile of a small grocer or a sandwich or pizza shop. Most of those callers, Beaulieu said, operate small convenience stores that offer takeout pizza and subs.

Under the law, any business with sales of food for immediate consumption totaling more than 75 percent of its total sales must collect tax on all single-serve snack foods such as chips and pretzels.

Mohammad Dar, owner of Stillwater Convenience in Bangor, said Monday that he had no knowledge of the tax repeal before being approached by the NEWS. Dar said he has continued to collect tax on all snack items since Jan. 1, and added that he dislikes the repeal because he believes it will mean more work for small-business owners with little or no staff.

“I think the state should try to make it easier for business owners,” said Dar, who assumed ownership of the store four years ago. “Maybe the big companies … can track these things. This is confusing, and it’s more work for nothing.”

Dar said he couldn’t recall receiving any notices about the tax repeal from the state, and said he now would have to scramble to come into compliance with the law. “Now I’m going to go through this and try my best to comply with the law,” Dar said. “But it’s going to be tough.”

Barbara Wildes, manager of the Corner Store in Bangor, said Monday her store received notice about the tax changes and has implemented them accordingly. There has been little trouble with the new law, Wildes said, though some customers have expressed surprise at purchasing tax-free doughnuts and pastries.

“We have customers who come in and buy a coffee and a doughnut every day, and they have their exact change,” Wildes said. “So it’s been a big surprise to them.”

Beaulieu said his agency had anticipated questions about the new law, and sent out informational mailings to all merchants as early as July of last year. Those mailings, he said, were followed by bulletins in September and November.

In the meantime, Beaulieu said any mistakes made by merchants trying to come into compliance with the law can be corrected.

“If [merchants] continue to tax those items until they do get clarified,” Beaulieu said, “that tax is still due to the state of Maine unless they can identify the customers they collected it from and return it to them.”

Businesses that waive tax on items that are still covered by sales tax, Beaulieu said, must return to the state any lost revenues. Those shortfalls, Beaulieu said, would most likely be identified during an audit of a business.

Confusion over the new law, however, isn’t limited to store owners. Some Maine legislators have introduced bills designed to tweak the snack tax repeal to further eliminate taxes on such items as bottled water, candies and confections and half-pints of milk.

Questions about the snack tax repeal may be directed to Maine Revenue Services at 287-2336.