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Tax crooks cook up a food tax scam

March 5, 2012

Alabama, Arkansas, Hawaii, Idaho, Illinois, Kansas, Mississippi, Missouri, Oklahoma, South Dakota, Tennessee, Utah, Virginia and West Virginia collect state sales tax on food.

In Georgia, Louisiana and North Carolina, food sales are subject to local taxes.

I understand that everyone eats, except for maybe the stray super model. That makes tacking a few cents onto a grocery bill an appetizing way for states and local governments to get much-needed money.

But precisely because everyone must eat to live, taxing such a necessity just doesn't seem right to me.

Food or not? Plus, the determination of what is "food" and what isn't for tax purposes can drive shoppers, store owners and tax collectors to drink.

Utah, for example, has a lengthy food tax flow chart to walk retailers through the various edibles' tax/no-tax possibilities.

Even in Wyoming, a state that doesn't have a food tax per se, sellers have to follow a similar elaborate recipe to make sure they are clear as to what is or isn't food for tax purposes.

At least, according to the Federation of Tax Administrators, the sales tax rate on foodstuffs in several states is lower than the general sales tax rate.

And some states allow a rebate or income tax credit to compensate lower-income households for the taxes they paid on groceries. That's the case in Hawaii, Idaho, Kansas, Oklahoma and South Dakota.

IRS scam warning logoFood tax scam: But now I learn about something that's more distressing than taxing food.

Tax con artists are using food taxes to entice unsuspecting victims and take even more of their money.

This is a variation of the American Opportunity education tax credit scam I blogged about last week.

These creative crooks are still targeting the elderly and poorer families. And they're still using the real education tax break for their nefarious purposes.

Apparently when someone expresses skepticism about the fake tax claim because they didn't go to college or aren't paying for anyone else's schooling, the con artists tell their potential victims that it's OK to claim the college credit because it's also available to compensate them for paying taxes on groceries.

Really? An education tax break that offsets state and local taxes on groceries? Why? Because you sent your favorite student care packages full of munchable goodies?

In noting this variation of the education tax credit scheme, the IRS doesn't elaborate so we're just left to speculate on the scam specifics.

But obviously enough creeps crooks con men scam artists creeps are out there using it, and with some success, or the tax agency wouldn't have spread the warning.

So I join Uncle Sam in encouraging you to be dubious about any unusual ways to cut your tax bill or get a bigger refund, especially when they are suggested by someone you don't know.

At tax time, it's usually the case that if it sounds too good to be true, then it isn't true. And it could cost you.

You also might find these items of interest:

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The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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