United States

Washington State: No Sweet Result for a Bakery Taxpayer

Apr 10, 2017
From KPMG TaxWatch

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The Appeals Division of the Washington State Department of Revenue recently addressed whether a “bakery item” included a pie or roll with a savory, rather than sweet, filling. The taxpayer, a business that sold a variety of sweet and savory pies, rolls, and pastries, was assessed uncollected sale and use taxes on its retail sales. The taxpayer had ceased collecting taxes on its sales in 2004 after receiving a Special Notice from the Department. In the Special Notice, the Department advised that due to a law change “bakery items” such as bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas were not subject to retail sales and use tax. Under Washington law, sales of prepared foods are subject to sales and use tax. “Prepared food” does not include bakery items, which are exempt. The issue before the Division was whether savory (i.e., filled with meat and/or cheese) pies and rolls were exempt bakery items. Without really addressing why a meat pie is not the same as a sweet pie (when it was described in the same terms but for the filling), the Division concluded that the term "bakery items" must be construed to mean items prepared and sold by a typical bakery and that savory baked goods that could serve as meals were not bakery items. The Division also noted that it had previously determined that piroshkies (rolled pastries filled with meat, vegetables and/or cheese) were not bakery items as they were savory baked goods that could serve as a meal. As more than 75 percent of the taxpayer’s sales were of “prepared foods” the Division next concluded that virtually all of the taxpayer’s sales were subject to retail sales tax by virtue of a Department rule. The taxpayer requested penalty relief on the basis that it had relied on "specific, official written advice and written tax reporting instructions from the department" in determining that its sales were not subject to sales and use tax. The Division denied the requested penalty relief, noting that the Special Notice (which merely set forth the definition of bakery goods) did not provide specific advice and instructions to the taxpayer at issue, but instead was a general notice sent to many taxpayers to highlight newly adopted changes in legislation. Please contact Michele Baisler at 206-913-4117 with questions on Washington Determination 15-0196.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.