New tax shows up in receipts

By FRITZ BUSCH

Journal Staff Writer

NEW ULM -- Don't be surprised if your grocery store candy or food receipt includes a 6.5 percent state sales tax that it didn't have in the past.

Confused? You've probably got some company.

As of Jan. 1, 2002, items that were not previously taxable, like store-made doughnuts and some other foods are now taxed.

Things like dried fruit and honey-roasted peanuts that contain sweetener became taxable candy this month. Fruit roll-ups, which were classified as food last year are now candy. Marshmallows, chocolate chips and cake sprinkles were also reclassified.

The good news is New Ulm's two grocery stores have not passed on the new tax to consumers by raising prices.

The Minnesota Department of Revenue said the tax changes were made in order to make taxable items more consistent from state to state. The tax change makes candy and food taxes alike in 39 states.

The tax changes are supposed to simplify sales tax administration, increase compliance and protect local retailers from online outlets that could be located in places where taxes would not apply, Minnesota state officials said.

Federal regulations do not currently allow states to impose sales taxes on online purchases in their state.

The 39 states with the same sales taxes eventually hope to get federal approval for online sellers to pay the tax.

Grocers with stores in different states won't have to deal with as many different tax laws anymore.

The new tax classifications were sent to state grocers in mid-December. The changes caused some grocers to scramble to quickly to get the revised data into their electronic checkout systems.

One of the stickier parts of the changes is that if candy bars have flour in their ingredient list, they aren't taxed. Among those with flour are licorice, Reeses Stix, Twix, and Kit-Kat.

The small details don't end there.

Vegetable and fruit drinks are only taxable if they have less than 50 percent fruit juice. Last year, they were taxable only if they had less than 10 percent fruit juice.

New Ulm's Hy-Vee Food Store manager Tom Hobt said things are going smoothly at his store now, except that there is still some consumer confusion.

"The only thing we noticed was there was very little information that got out to the public. I think it's catching some consumers by surprise, like it did us at first," Hobt said. "Sometimes, we have to explain the new tax laws to customers when they see it on their receipts. It takes time to do that."

Hobt said his store was made aware of the new taxes a week before Christmas. It caused some additional work then, too. His staff had to read some food ingredient labels, looking for the word flour. Hy-Vee got some corporate help with the tax changes.

The tax changes also caused additional book-keeping time, Hobt said.

New Ulm's CashWise Foods Store Manager Brad Johannes said the tax changes did not add any book-keeping work for his staff, but he isn't a big fan of more taxes.

"The whole thing went pretty smooth, but we don't like more taxes," Johannes said. "It was kind of a surprise at first. Where's it going to end when you start taxing food? Minnesota is one of the highest-taxed states in the nation. Now the tax burden is a little heavier."

Other new state retail laws that took effect Jan. 1, 2002, include:

* Mercury thermometers made after June 1, 2001, cannot be sold or distributed. Mercury is particularly dangerous in fetuses and small children, causing developmental and neurological problems.

Mercury thermometers can still be used in technical calibrators and for some agriculture uses.

* A law that increased the eligibility of seniors in Minnesota's prescription drug program from those with incomes of up to 120 percent of federal poverty guidelines to 135 percent, is on hold due to the state's budget woes.

* Stiffer conservation guidelines in the Minnesota Energy Security and Reliability Act.

* Minnesota state colleges and universities must accept full credit for courses completed at any other school in the system, if statewide transfer curriculum requirements are met.

* The 1.5 percent health care provider tax will be extended for two more years. It replaces a 2 percent tax that was scheduled earlier.