Local legislator seeks to correct 'bread tax'

By RON LARSEN

Journal Staff Writer

ST. PAUL -- If you've bought bread baked in the store in which you shop recently, you've already learned that bakery products made within the store now are subject to sales tax.

Because of a new state law that went into effect Jan. 1, bakery bread now is considered to be a prepared food which is subject to sales tax.

The good news is that many consumers and business owners have complained loudly to their legislators, and their complaints are being heard in St. Paul.

Rep. Howard Swenson (R-Nicollet) is co-sponsoring remedial legislation that would eliminate the bakery product tax.

"Taxing bakery products was an unintentional consequence of passing a broader sales tax bill," Swenson said. "It has always been state policy not to tax food, and the bill I'm working on will once again put bakery products in the non-taxable category."

If that's been state policy through the years, how did bakery products end up being unintentionally taxed?

The answer is found in a national effort to streamline state sales tax codes, providing uniform tax base definitions within states. Among the portions of the national model that were passed by the Minnesota Legislature last year, "prepared food" was defined as food that is sold hot or heated by the retailer, mixed or combined by the retailer, or sold with eating utensils provided by the retailer. Bakery products, such as bread, meet that definition.

The result is that a baker now has to charge sales tax on bread made in his own bakery while breads shipped to the bakery from other sites aren't taxable.

"Minnesota bakers and their customers shouldn't be penalized by a legislative oversight," Swenson said. "Hopefully, the Legislature will take action on this bill at the beginning of the 2002 session."

The legislation may be expanded to cover processed meats prepared by meat markets, Swenson said, because of a similar tax implication.