Faced with mounting pressure from the governor on down through the statehouse and into Connecticut consumers’ homes, the state Department of Revenue Services (DRS) admitted late last week it had erred in its interpretation of new legislation that levied an added tax on what was originally a huge menu of prepared foods.

According to a September 19 memo from DRS Commissioner and former Hamden Mayor Scott Jackson, “The DRS initially interpreted the 2019 legislation to add certain circumstances where the [meals tax] would be applied. However, when the entire statute is read as a whole, it becomes clearer that the General Assembly did not expand the applicability of the tax, but simply increased the existing tax.”

The initial move by the DRS quickly sent state lawmakers and executive leadership into a frenzy.

Newtown State Rep Mitch Bolinsky (R-106) accused the DRS of widening “the net to create a new, full-blown food tax.”

“The new definition of a ‘meal’ will put nearly everything we consume at risk of being taxed,” he said before the revenue commissioner changed direction. “This kind of deception is unacceptable and is not the ‘honest budgeting’ the governor promised on the campaign trail.”

Following conversations with Governor Ned Lamont, the state Office of Policy and Management, lawmakers, and key legislative staff, Cmmsr Jackson said his office “reevaluated its initial interpretation of the 2019 legislation and determined there is an alternative and defensible interpretation that more closely aligns with the language of the statute and the clear intent of the legislation.”

In a revised document issued to grocery stores and other prepared food purveyors, the DRS states that “As of October 1, 2019, sales of meals and certain drinks that are currently subject to tax at a rate of 6.35 percent will become subject to an additional one percent rate of tax for a total effective tax rate of 7.35 percent.”

What Foods Are Taxed?

The DRS Policy Statement PS 2002 (2) goes on to state that food for immediate consumption constituting taxable meals includes, but is not limited to:

• Coffee or tea (ready to consume, hot or iced);

• Sandwiches and grinders;

• Popsicles, ice cream cones, cups, sundaes, and other individual servings of frozen desserts unless sold in factory prepackaged multi-unit packs;

• Ice cream, frozen yogurt, and other frozen desserts sold in containers of less than one pint;

• Yogurt sold in containers of eight ounces or less unless sold in factory prepackaged multi-unit packs;

• Fountain drinks, shakes, and syrup-flavored crushed ice drinks;

• Bottled or canned fruit juices and drinks, containers of milk, and non-carbonated mineral or spring water sold in containers of 16 fluid ounces or less unless sold in prepackaged multi-unit packs;

• Salads sold at salad bars;

• Salads sold in containers of less than eight ounces;

• Donuts, muffins, rolls, bagels, and pastries (five or fewer);

• Cookies sold loose that retailers place in containers for customers (five or fewer when cookies are sold by quantity or less than eight ounces when cookies are sold by weight);

• Pies or cakes by the slice;

• Prepackaged or factory-sealed bags or packages of five ounces or less of chips, popcorn, nuts, trail mix, crackers, cookies, snack cakes, or other snack foods;

• Single pieces of fruit;

• Pizza, whole or by the slice;

• Cooked chicken sold by the piece, including “buckets” of chicken, and whole cooked chickens;

• Ribs sold by the piece or portion and whole racks of ribs; and

• Items such as salads, side dishes, and rolls when sold as part of “family pack” meals, including, typically, whole chickens or buckets of chicken, even when the items exceed the weight or quantity limits specified above.

The Policy Statement clarifies sales of meals by a supermarket that are subject to sales and use taxes include:

• Catering services performed by a supermarket;

• Sales of sandwiches, grinders, coffee, or tea prepared in a supermarket at a delicatessen counter or elsewhere for takeout. The sales of these items sold anywhere in a supermarket are taxable;

• Sales of meals in areas of a supermarket where food is intended to be consumed in the supermarket, such as at snack bars or food courts. The meals sold in these designated eating areas are taxable even if taken off the premises by the purchaser.

The DRS goes on to illustrate four examples:

Example 1: A customer purchases a meal in the snack bar area of a supermarket and pays for it at the snack bar area. This transaction is taxable because the sale occurred in the area designated for eating.

Example 2: A customer purchases and pays for a meal at the snack bar of a supermarket and does not eat it at the designated eating area but takes it home. This transaction is taxable because the sale occurred in the area designated for eating.

Example 3: A customer sits in an area designated for eating and while at the table, gives a supermarket employee money for a pizza, whole cooked chicken, or salad. This transaction is taxable because the meal was purchased in the area designated for eating.

Example 4: A customer purchases a meal in the checkout line of a supermarket then consumes the meal in a designated eating area. This transaction is nontaxable (except if it is the sale of a sandwich, grinder, coffee, or tea) because the meal was not purchased in the area designated for eating.

Special Session Needed?

Even after Cmmsr Jackson walked back some of the initial DRS provisions September 19, Republican legislative leaders stood by their call for a special session. House Minority Leader Themis Klarides, R-Derby, called the Lamont administration’s new tax guidelines “some flimsy bureaucratic remedy.”

“We need to come into special session to fix this mess,” she said. “The Democrats passed this law in June to tax groceries — it is in their budget that was signed by the governor.”

The Connecticut Mirror clarified that the budget provision refers only to increasing the sales tax on meals and beverages served for immediate consumption, including those sold in grocery stores, and not groceries generally.

The language describes the higher rates as applying “to the sale of meals… sold by an eating establishment, caterer, or grocery store; and spirituous, malt, or vinous liquors, soft drinks, sodas, or beverages such as are ordinarily dispensed at bars and soda fountains, or in connection therewith.”

Both Klarides and Senate Minority Leader Len Fasano, R-North Haven, said the believe a statutory change still is necessary.

“I appreciate the revised guidance, but this is nothing more than a temporary pause. It is not a permanent fix,” Fasano told the Connecticut Mirror.