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Conn. AG: Supermarkets Can't Tax Certain Prepared Foods

HARTFORD, Conn. - State attorney general Richard Blumenthal has ruled that grocery stores in the state can't collect state sales tax on prepared foods such as precooked turkeys, potatoes, and stuffing for Thanksgiving, according to published reports. The ruling came Monday at the request of Lt. Gov. Kevin Sullivan, in response to a consumer's complaints.

Although over-collection of sales taxes on prepared food items is a problem year-round, Blumenthal and Sullivan said their concerns were heightened because consumers increase their spending on such foods at the onset of the holiday season.

Blumenthal said in a statement that reimbursement must be offered to shoppers who have been overcharged. Records of supermarket purchases could be verified through consumers' discount cards, he suggested.

Sullivan was hopeful that the attorney general's office and the state's Department of Revenue Services (DRS) could work together to reimburse consumers through a general rebate at stores found to be in violation, regardless of whether individual shoppers can prove purchases. "Neither the stores nor the state should be enriched while consumers overpay," the lieutenant governor said.

Supermarkets may have collected millions of dollars through such taxes, with the money going to the DRS, government officials said. The situation was attributed to the department's unclear policy on when to apply sales tax to prepared foods, which Sullivan called "confusing at best."

According to the attorney general's office, the application of sales tax on food in Connecticut depends on where the product is bought and whether it's intended to be eaten on the premises or later. Supermarket food generally has been exempt from sales tax, while food at "eating establishments" is taxable. However, the increasing number of in-store food courts in supermarkets has confused the issue.

Grace Nome, president of the Connecticut Food Association, a Farmington-based industry group, explained to Progressive Grocer that the issue is more complex than local press coverage has indicated. Although a change in legislation has been considered that would bring Connecticut sales tax rules on food in line with those in neighboring Massachusetts, Nome said a resultant rise price in many previously untaxed food items would place an unfair burden on shoppers. She observed that such an initiative as the attorney general's, which is intended to help consumers, might actually push legislation to change the current sales tax, which ironically could create "a more costly situation for consumers."

Nome regretted that publicity made it "look like stores are ripping [customers] off," and was eager to make shoppers aware that any overcharging was done "in error." She was skeptical of the millions of dollars alleged to have been collected through the improperly applied sales tax, noting that the state "was coming up with numbers that mean nothing."

Nome, who said that she believed that reimbursement would probably be achieved through a coupon program, added that her organization "was trying very hard to find a solution [to the sales tax issue] that's not costly to the consumer."

The Hartford Courant reported that the matter first came to state officials' attention last year, when Connecticut resident Ed Peruta filed class actions against Big Y and Shaw's for collecting sales tax on prepared foods. The suit against Big Y has been settled, allowing shoppers to use their customer cards to track and then credit their accounts. It was estimated that the chain overcharged $800,000 in taxes over two years. Shaw's, which is estimated to have overcharged $251,000 in taxes during a two-year period, is close to settlement, it was revealed at a press conference Monday. Last week a third such lawsuit was filed, against Price Chopper.
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