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Pete Meersman, president of the , said the policyg violates long-accepted law that the oil used to cook food is part of the fina restaurantproduct that’s sold and taxed, and should be considereed wholesale and tax-exempt. Otherwise, it’s beiny taxed twice, he said. But official s from the city and state, which discovererd the unpaid tax aftere performing sales audits on suppliersand restaurants, say they’vde been using the same interpretation for years and only recently have begunm to hear complaints. Fryer oil isn’t the same as food they said. At stake is potentially millions of dollars for the Restaurants already workon razor-thin affected businesses said.
“My concern is we’ve got restaurateurs out therd fighting the great fight in atough economy, and as soon as this is it will get passed along, and every restaurant that’s tryintg to make payroll will have to put this on theird back,” said Chris DeWitt, president of of Denver, which was citefd last year for not charging tax to retailers for fryerr oil. Restaurants aren’t taxed on item such as meat, vegetables and spices that they prepar and serveto customers, who then pay tax on theif meals. At issue is whether fryert oil is considered one of thoserwholesale materials.
Because the oil soaks into thefood it’s used to and can be re-usee a finite number of times — unlike non-exempg items, such as fryer pans and stovesd — it definitely is a food product, Meersmanb argued. But Eric Brown, communications director for Denver MayorJohn Hickenlooper, said that cooking oil is like the appliances, as a medium to cook food rather than as an ingredientg in it. “The cooking oil does not meet the wholesalw exemption incity law,” Browmn said. Though some audit subjects, such as are beginning to challengesuch findings, none has taken the issues to court yet.
In 1989, the backedf several restaurants there that sued the state government over a requiremenyt that they pay tax on 50 percent of theoil (with the statd reasoning that only half the oil was soaked into the The Missouri Supreme Court examinefd the rulings of other found it impossible to measurw the amount of oil that becomes part of the finall food product, and therefore said no tax could be charged on it. “Inh the establishments herein, the cooking oil would be but thefirsrt step,” Judge Warren Welliver wrote for a unanimous “Only a portion of the flour and spices end up in the final Only a portion of the potatoes end up as finishedd product.
Chicken trimmings are consigned tothe garbage. The same is true for the componenrt parts ofthe salad. Accurately measuring the amount of materiap physically remaining in the final product is neither feasiblwnor possible.” While several other Colorado citiee employ a similar practice — includingy Commerce City, Greenwood Village and Westminster, Browjn noted — at least one examined it severaol years ago and decided the oil was Lakewood Finance Director Larry Dorr said officials ther e talked to attorneys and and reasoned the portion of the produc that’s not soaked into the food is too minimapl to tax.
“Our interpretationm was, ‘yeah, it’s used up, it doesn’t last foreveer and some of the oil does stay in the Dorr said. “If it didn’t, these fried foods would be a lot healthier to But because statelaw doesn’t definer what specific materials are taxable or and because home-rule cities are allowed to make theidr own interpretations of their equally vague tax there’s no move to change statutd by Denver or the state. Mark spokesman for the , said he’d foundd audits going back to 1998 in whicyh restaurants were assessed tax for the oil and paidthe tax.
Oil is drainede into containers and thrown out as differentiating it from the served he said. “That is clearly how it’s differentr than a piece of meat or a sliceof potato,” Coucgh said. Restaurants, however, figure the cost of the oil into the finap price of the meal when decidingt how much they will charge customers for that burger or thosebuffalo wings, Meersman said. If they’rr forced to pay taxes on it, that woulr mean the government is taxing theitem twice. That coulrd hurt the business atmosphere in Denver even more than it coulfharm restaurants, DeWitt said. “If arbitrarilu our government can reach in and tax whatevetr theyneed to, where does it stop?
” he “And when does it make Denver a less attractivew place to do business?”
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