Maryland: Taxing Ice-- Or Not

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Lawmakers in several states (including Tennessee and Wyoming) are currently kicking around the notion of exempting food from their state sales tax. This will certainly be a progressive move in any state that does it--as long as states can afford to make up the revenue loss.

But here's a cautionary note, and it's a caution not so much about exempting food as about exempting anything: when Maryland decided, back in the day, that they wanted to exempt food, they had to decide what "food" really means. And one thing they decided was that ice wasn't food. Unless you put it in a drink, in which case it actually is food.

For whatever reason, Maryland tax administrators decided last fall that they needed to revise their sales tax regulations to make it clear that ice sculptures are taxable. The revised regulation on this can be found here.

Now, it's hard to see why you'd need to make this explicit-- maybe some joker tried to put an ice sculpture in their drink? But the broader point is that anytime you draw a line in the tax code between what's taxable and what's not, it ends up being a complicated process. Good intentions make complicated tax laws.

This isn't to say that exempting food is a bad idea. It's a very progressive move. But, like any exemption, it has its administrative cost.

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