11/30/2020 Assessment Community Weekly

We hope that you all had a great Thanksgiving! We’re keeping it super simple this week with just an answer to last week’s quiz, and a new judicial case. (Well, kind of simple . . .)

Last week we asked: True or False? There’s a tax break in Canada for cereal if it contains a toy.

This caught our eye. Who didn’t love those toys at the bottom of their Cocoa Pebbles? Well, there are multiple Fun or Bizarre Tax Facts webpages that mention that Canadian companies receive a tax break for including a toy in their cereal. The webpages even note that the tax break only applies if the gift in the cereal isn’t wine, beer, or liquor.

Of course, we don’t want to share information with you without first substantiating it, so we did some research on this.

We couldn’t dig up any documentation about such a tax break. But, the plot thickened when we did find what we the writers of this newsletter believe to be the source of the misinformed tax “fact.”

A tax notice from the Province of Ontario discusses whether a package containing a sales tax-exempt item (such as cereal) would be taxable if it contained a taxable item (such as a toy). It concludes that, as long as the cost of the toy plus the packaging is less than 10% of the cereal, then the cereal remains exempt. It mentions that the taxable item cannot be liquor, beer, or wine (as well as candy, snacks, or soft drinks).

All of this seems to suggest that the misinformation began when someone misunderstood the notice to mean that cereal becomes tax-exempt if a toy is inserted into it. Our research indicates that the cereal isn’t taxable to begin with, and it doesn’t become taxable if a toy is included, as long as the toy meets certain qualifications.

We conclude the answer to our quiz is false.

But we’re always open to learning. Know something we don’t about this little obscurity? Or have ideas for future quizzes or newsletter content? Send an email to geoffrey.gloak@tax.ny.gov.

We’ll try to bring the quiz back closer to home next week. Stay tuned.

New judicial case

We’ve added NYCTL 2016-A Trust v Eglise Baptiste De La Communion Fraternelle, Inc. to Judicial cases.