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FROM:  VIRGINIA INDEPENDENT CONSUMERS AND FARMERS ASSOCIATION

RE:  VIRGINIANS TO SEE 5 PERCENT INCREASE IN MOST FOOD PRICES DUE TO NEW TAX CODE RULING
RELEASE DATE:  IMMEDIATELY
DATE:  OCT. 30, 2008
FOR MORE INFORMATION:  Deborah Stockton [email protected]

FRONT ROYAL: Most Virginia food will jump 5 percent based on a new enforcement plan of the sales tax code by the Virginia Department of Taxation.

Blue Ridge Meats, a small federal inspected slaughterhouse here, is the apparent spearhead of this new ruling, which would subject all food manipulation to the tax.  Historically, costs of food manipulation like turning chickens into McNuggets or milk into ice cream never paid sales tax.  Services are not subject to sales tax, which is applied to merchandise and fabrication.

But under the new enforcement procedure, food manipulation will be called fabrication and therefore subject to the 5 percent sales tax.  Even hunters are not immune.  When a neighbor or business cuts up a deer carcass, the processing fees will carry a 5 percent sales tax.

On October 22,  Kathy Vance and Robyn Harford, field auditors for the Virginia Department of Taxation, submitted the new enforcement provision to Blue Ridge Meats owners Doug and Lois Aylestock.  The owners immediately appealed the regulation to Wes Loomis, the audit supervisor in the same agency, who upheld the new procedure.

According to the Aylestocks, the auditors used the term “new interpretation” to describe the ruling, but the Virginia Department of Taxation disputes that language.  “This has always been taxable;  it’s nothing new to treat services that deal with the manipulation of personal property as sales taxable,” said Jenny Slaughter, official spokesperson for the Department.

When asked why this provision had never been enforced, she said “I have no clue.”  When asked why it wouldn’t apply to Tyson’s fabricating McNuggets, she said,  “It does sound like the same thing.”

The ramifications of this new ruling have not yet been fully determined, but applied consistently to all food manipulation, it would cause an immediate dramatic jump in food costs.  For example, a potato chip manufacturer turning raw potatoes into chips would pay 5 percent on the cost of that processing.  

The new ruling applies even to food items for resale.  According to the auditors,  the new ruling would apply to small and local farmers who sell beef, pork and lamb directly to neighbors, even if the farmer charges the customer food sales tax.  Resale items have always been exempted to eliminate double taxation.  Despite the Department’s nonchalant attitude toward this new policy, the fact remains that no similar businesses in the Commonwealth pay the tax.  Whether it is a new interpretation or a new enforcement, it will result in substantial food cost increases.

“Isn’t it just like the government, to single out a small, local food business to slip in an unprecedented and dramatic tax on food?  Why didn’t they go after Tyson?  This is outrageous, and all Virginians should be incensed at this historic re-engineering of the tax code by unelected bureaucrats,” said Willard Lutz, president of the Virginia Independent Consumers and Farmers Association (VICFA).

 

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