(Source: MIRS.news, Published 09/28/2023) Years after a movie theater chain's complaint about whether they should be reimbursed for paying a sales tax on bottled water and prepackaged candy, legislation aimed at clarifying what is taxable "prepared food" is on its way to the Governor's desk.
However, as the Senate approved HB 4377 and HB 4378, both by party-line votes of 20-18, claims of confusion over what exactly the legislation means – and will mean in the future – continue to roll out.
In a complaint filed with the Michigan Tax Tribunal (MTT), Troy-based movie theater chain, Emagine Entertainment, argued it should be refunded for paying a sales tax on bottled water and prepackaged candy from February 2010 to February 2014.
Currently in Michigan, food ingredients and food purchases not made to be immediately consumed are exempted from the state's sales and use tax.
Respondents to the aforementioned complaint initially granted Emagine Entertainment a refund for the bottled water sales, but not for the prepackaged candy because it was not considered to be "unprepared food."
Later, in November 2020, the Michigan Court of Appeals also upheld the Tribunal's stance in the complaint that the 75% standard was invalid, which determines when the availability of utensils like forks, cups and napkins is enough to deem food as taxable.
Currently under the standard, the simple availability of eating utensils, without a seller directly handing them to a customer, does not categorize food as "prepared" if the business' prepared food sales were worth 75% or less in the past tax year.
Because of the Court of Appeals' published decision, the 75% standard is not presently applicable.
HB 4377 and HB 4378 would both resurrect the 75% standard while confirming that products like bottled water, candy and food sold in an unheated state not be taxed.
It would additionally improve Michigan's alignment with the 44-state and Washington, D.C. Streamlined Sales and Use Tax Agreement (SSUTA), aiming to reduce costs and administrative load on local retailers handling sales taxes.
"Why is our Department of Treasury constantly digging into these tax laws and creating strange novel interpretations that harass our residents and create mass confusion? And here we have today another amazing example of this, where now we can't decide whether or not something should be taxed or not depending on whether they handed a fork to you or not," said Sen. Ed McBroom (R-Waucedah Twp.) during his no-vote explanation. "Whether they heated it up too long or not enough."
McBroom asked if nachos and cheese dip count as a heated meal, or if the cheese dip is a condiment while the nachos aren't heated.
"We don't know anymore. We'll have to let Treasury figure it out and they'll have 10 different interpretations from every different Treasury official who goes out there, and then decide which one can get them the most money to somehow bolster us through the next budget crisis," McBroom said.
