Sales Tax 101

3 Weird Sales Tax Exemptions

by Jennifer Dunn

When you went to register for your sales tax permit, you probably noticed that your state considers some items sales tax exempt. Most states, for example, either don’t charge a sales tax on food or tax this life staple at a lower rate.

But the food sales tax exemption just scratches the surface when it comes to sales tax exemptions. Throughout the years various special interests in states have lobbied – and won – to have their goods exempted from tax. This has lead to sales tax exemption oddities like…

Pumpkin

Pumpkins sales tax exemptionsNot one, not two, but THREE states have had sales tax exemptions on pumpkins at one time or another. While not all these laws are still intact, some of them are, and vary wildly depending on a myriad of factors.

For example, Iowa used to have a sales tax on pumpkins. Officials figured that since pumpkins are basically only bought once a year on Halloween that they should be taxed. Also, they were bought as decoration and not really as food. However, farmers balked, saying the tax would cut into profits. Now only inedible gourds are taxed.

New Jersey gets a little more in-depth with what’s taxed. Pumpkins are treated as a food item unless they’re painted, varnished, or cut and sold as decorations. So as long as you’re not using the pumpkin for Halloween and just plan to eat it, there’s a sales tax exemption. Pennsylvania is similar, where pumpkins used for decoration are taxed and food pumpkins are not.

Untethered Versus Tethered… Balloons

hot air balloon Sales Tax ExemptionsWho knew having fun could be so taxing? If you’ve ever taken a hot air balloon ride, you know how much fun it is. However, make sure you don’t smile too much if you want to avoid sales tax!

Okay, the law isn’t that crazy, but it is fairly arbitrary when it comes to the exemptions. It’s all about whether or not the balloon is actually tied down. If it’s tethered it’s considered a fun ride, and fun is taxed. Amusement rides are taxed and under the eyes of the law a tethered balloon ride is such a ride.

However, if it’s untethered, the hot air balloon ride becomes a legit form if air transportation. Suddenly it’s not fun anymore – it’s all about getting from one place to another, which isn’t taxed. Strange? Of course, but that’s sales tax for you!

Bagels

Bagel Sales Tax ExemptionsWith all the weird sales taxes on food it just seems like governments just have trouble figuring out one of the basics of life. Even one of the staples of New York life, bagels, aren’t exempt from strange tax laws.

Like hot air balloons, it comes down to an arbitrary detail: where you eat the bagel. If you walk into a bagel shop and order a whole bagel and take it home to eat, you don’t have to worry about sales tax. The bagel is exempt from the extra cents.

On the other hand, as soon as the shop owner picks up a knife and prepares the bagel for consumption, you have to pay sales tax. Also, if you take a whole bagel out and chomp away while you’re in the store, they technically need to charge you sales tax. Why? That’s just the way it works in New York, even though many businesses didn’t know the tax existed and had to pay back taxes.

Want to know more? The podcast Planet Money recently did a whole show on strange tax exemptions. Listen up for more sales tax wonkiness.

Does your state have any strange sales tax exemptions? Give us the details in the comments!

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