Sometimes We Have Silly Taxes

Here is the picture in all of its Norman Rockwell glow: the sidewalk hot-dog stand, the earnest scrawl of the sign announcing a sale for the benefit of buying new school playground equipment. And there, standing next to the cowlicked, freckle-faced boy selling hot dogs, is the tax man, scooping up his percentage of the change. What’s wrong with this picture?

What’s wrong is that this picture bears a remarkable likeness to what really happens under a foolish California tax law. The State Board of Equalization ruled recently that school organizations that sell food products as a means of raising money must pay sales tax. The ruling comes during a time when dwindling public resources have forced many extracurricular school activities, particularly athletics, to rely increasingly on fund-raising.

Monterey High in Monterey found itself in that position, with an athletic department budget that had dwindled from $12,000 in the late 1970s to less than $5,000 last year. But when the wrestling coach and team sold batches of fried calamari at the Monterey County Fair to augment the sports budget, they got slapped with a $1,000 tax bill.

The automatic exemptions once enjoyed by school organizations were lost in the mid-1980s when the Legislature named many specific organizations, such as the Boy Scouts, Girl Scouts and 4-H Clubs, as exempt. Other school organizations unknowingly lost their exemptions.

The Board of Equalization plans another hearing next month on the Monterey High case. In the meantime, Assemblyman Johan Klehs (D-Castro Valley) is preparing needed legislation to clarify the muddled law. Current law could make a school organization’s sales-tax status depend on whether the food sold was hot or cold, or whether it was sold at a county fair or a playground.

School organizations trying to raise money for civic or charitable endeavors shouldn’t have to split hairs--or hot dog buns--over taxes.