Postponement Sought for Start of State Snack Tax : Budget: Officials say it will be a nightmare for stores to figure out quickly what requires a levy. For example, pretzels will cost more but peanuts will not.

SACRAMENTO —  If you have a hankering for muffins, cakes and pies, taxes will be nothing to worry about. But if your sweet tooth prefers brownies, cookies and candy, then it is likely you will soon be paying a hefty sales tax.

If sweets are not your craving and crackers are your weakness, you will find saltines can be purchased tax-free but Ritz crackers will carry a sales tax. If health food is your kick, your granola will be taxable if sold as a bar but not as a cereal.

State tax collectors presented lawmakers this week with this sampling of the tangle of rules and regulations that will confront consumers and merchants if the Legislature and governor try to help cure state budget ills by broadening the sales tax to cover snacks.

The officials are especially concerned that the proposed snack tax could be imposed in a few days, as soon as possible after the new fiscal year begins July 1, leaving them without sufficient time to prepare.

Brad Sherman, chairman of the State Board of Equalization--the agency that collects California’s sales tax--followed the staff memorandum with a personal letter, pleading with legislative leaders to delay until Oct. 1 implementation of the nation’s first and only snack tax. He said while a few other states have taxes on food, no state has attempted to single out snack foods for a sales tax.

In an interview, Sherman said the proposed tax would be a “nightmare” to administer because it draws distinctions that are “incomprehensible and ludicrous.” He said the measure is often so unspecific that tax experts have had to spend hours trying to make “wafer-thin distinctions between whole pies and snack pies, non-taxable graham crackers and taxable crackers . . . untaxed peanuts and taxed pretzels.”

While the agency’s staff has prepared preliminary interpretations of the new tax, Sherman said it could take weeks for merchants to reprogram their cash registers and computers to collect it. The state portion of the sales tax on snacks would be 7.25%, assuming a sales tax increase proposal also passes. In some counties, such as Los Angeles, where a local sales tax is added on, the total tax would be 8.25%.

Sherman said many businesses, such as bakeries, would be getting into tax collecting for the first time. A bakery that sells only baked goods for home consumption has not needed a sales tax permit. Under the new tax, it would be required to collect tax on cookies and brownies.

“We have an inadequate amount of time to communicate an ill-defined concept to hundreds of thousands of retailers, some of whom are not even on our mailing list at the present time,” Sherman said.

Gov. Pete Wilson and legislative leaders, desperate for new tax revenue to dissolve a potential $14.3-billion deficit, are not expected to agree to a delay. A spokesman for the governor said the State Board of Equalization has known about the tax proposal since January and had ample time to prepare for it.

“The Administration is confident the tax can be up and running by July 15,” said spokesman Franz Wisner.

Wisner said the tax would produce $220 million in annual revenue and a delay in its implementation would cost the state $50 million. “And frankly, the state can’t afford that,” he said.

Noting that Sherman’s letter did not reflect the views of the entire five-member board, Wisner suggested that its timing may have been “politically” designed to curry favor with snack food companies and others fighting the tax.

Board member Matthew Fong said he saw no reason for the board to push for a change in the effective date of the tax.

“I think the debate is over. I don’t know why the chairman is pushing so hard,” he said. “It’s up to us now to implement the tax.”

Steven Kopp, president of the Southern California Grocers Assn., predicted that it would be very difficult for the 3,500 grocery stores in Southern California to gear up to collect the tax by July 15. Assuming the tax is passed this weekend, he said it would be a week before most grocers would receive guidelines on the tax from the board.

“I think that’s cutting it awfully, awfully close,” Kopp said. “It puts a tremendous amount of pressure on us to change a lot in a very brief time.”

For small retailers who are not automated, he said the tax changes will be “mind-boggling.” For the big chains, he said, the difficulty will be finding enough computer experts who can reprogram their equipment in time.

When there was a change in the sales tax in the past, he said, retailers usually had two or three weeks lead time but now they may have less than a week.

Because time will be so short, Sherman said the guidelines issued by the board’s staff can only be preliminary and the board may want to change tax interpretations on some items later. As an example, he said, some board members already disagree with the finding that doughnuts should not be taxed under the new measure.

Sherman said he believes that the snack tax proposal is deliberately vague because lawmakers were torn between their desire to impose taxes on items sold by large corporations but not on products sold by their small hometown businesses.

“There’s a broader majority in the Legislature for taxing a Hostess cupcake or an Oreo than a small bakery’s cupcakes or its cookies,” he said. “When you try to seek consensus for something that clearly taxes the products of your local doughnut shop, people are a little hesitant to put that in black and white.”

Sen. Wadie P. Deddeh (D-Bonita), the author of the tax bill, acknowledged some difficulties with the tax but said it was the best the Legislature could do given the state’s financial situation.

“The state is sinking and we need to do something fast,” he said. “Of course I don’t care what kind of tax you pick on, you’re going to offend somebody.”

Deddeh said he has his own rule of thumb for determining what is taxable and what is not.

“It’s very simple,” he said. “If you go into the grocery store and you buy something and as you walk out, you want to tear it open and start eating it--then it’s a snack.”

Taxing Your Snack

Under proposed sales tax legislation, snack foods--such as cookies, potato chips, corn chips, pretzels and popped popcorn--would no longer fall under the general tax exemption for food products. Snacks would be taxed, but several foods that are similar would not be. Here is a selected look at some of the distinctions: FACING TAX

All forms of candy

Figurines

Rice cakes

Cupcakes

Twinkies

Granola bars

Screaming Yellow Zonkers

Crackerjack

Fig Newtons

Ritz crackers

Carnation Breakfast bars

Pringles

Cheese puffs

Doritos

Cheezit crackers

Ding Dongs

REMAINING EXEMPT

Baking chocolate

Baking confections

Glazed fruit sold for baking (but not when sold as candy)

Most cereals

Muffins

Doughnuts, pastry sold as bakery products

Slice of pie purchased from a deli (but not as prepackaged snack)

Saltine crackers

Nuts

Seeds

Dried fruit

SOURCE: State Board of Equalization