Some foods lose tax-exempt status

OLYMPIA — That bottle of designer water may cost a little less when changes to the state’s sales tax kick in next month, but watch out for a hike on sweetened ice tea and a tax on your morning doughnut.

The changes stem from a new law that brings the state’s tax codes in line with 40 other states that have signed onto the Streamlined Sales and Use Tax Agreement.

The law — designed to make levying the sales tax easier from state to state — removed some items from the list of things subject to the sales tax and added others.

The state levies a 6.5-cent on the dollar tax on most sales, while most local governments take a few pennies more. One of the biggest exemptions is for groceries, but just what counts as groceries and what counts as taxable prepared food has always been a little slippery.

"Legislators want to tax restaurant food, but they don’t want to tax grocery store food," said Gary Grossmann, a taxpayer information specialist for the state Department of Revenue. "The traditional line between restaurant food and grocery store food is very fuzzy these days."

Under the current law, bottled water and all carbonated beverages aren’t considered food. Under the new law, carbonation doesn’t matter, but any sweetened beverage is taxed — unless it contains milk, milk substitute or more than 50 percent fruit or vegetable juice.

And remember, it’s all sweeteners, not just sugar, that bring the tax into play.

"Diet doesn’t get you off the hook at all," Grossmann said.

The state figures to rake in an extra $9.6 million over the next 18 months by taxing sweetened, uncarbonated beverages. But it’ll lose about $4 million by exempting bottled water.

In another change, crushed, shaved, or cubed ice won’t be taxable come January, but block ice will. After all, what’s bottled water without a little ice?

And that doughnut you grab with your morning coffee? It’ll probably be taxed in January under a provision that taxes prepared food served with utensils. (Yes, the napkin counts.)

But if you buy a dozen doughnuts, that counts as groceries, so you’ll be tax-free.