Sales Tax Articles
Sales Tax State Activity Update - August 2007
You Say Potato, I Say Potato - Let's Call the Whole Thing Taxed
The case revolved around whether ‘Regular Pringles' resembles potato crisps, potato sticks, potato puffs and similar products made from the potato or from potato flour, or from potato starch and are therefore subject to the standard rate of VAT.
Counsel for the Appellant took the position that ‘Regular Pringles' should be zero-rated on the basis that they are not similar to potato crisps because of their regularity of shape which is not found in nature, the uniform colouring, texture, taste and packaging among other differences.
The UK VAT Tribunal applied a two stage test, both parts of which must be satisfied for a food to be standard rated. The first stage was to determine if the product is similar to potato crisps, potato sticks or potato puffs. In this regard the Tribunal determined that the "ordinary reasonable man in the street" would view ‘Regular Pringles' as similar to potato crisps.
The second stage of the test was to determine if ‘Regular Pringles' is made from the potato, or from potato flour or potato starch. Since the potato flour content of "Regular Pringles" is over 40 percent the answer was yes.
Having passed both parts of the test, the Tribunal found that ‘Regular Pringles' are subject to the standard rate of VAT. The case highlights the difficulty of determining the taxability of modern products using legislation that is 40 years old.
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