"Where's the Beef?" Using state sales tax to discourage consumption of food prepared outside the home

Background: Obesity and related health concerns are a large public health epidemic. Consumption of food prepared outside the home provides from 30-40% of daily caloric intake which has contributed to adult and juvenile weight gain. Pricing of foods influences food choice and food consumption. One policy approach governments may use to reduce obesity is to impose higher taxes on foods prepared outside the home (e.g., in restaurants) to discourage consumption.

Methods: Primary legal research was used to collect and analyze the variability in sales tax rates effective as of January 1, 2007, for each of the 50 states and D.C. for food sales in restaurants, fast food chains, and prepared food items. All data were state-verified and were compiled as part of the Robert Wood Johnson Foundation-supported ImpacTeen project.

Results: Preliminary data indicate that sales tax rates range from 0%-10% with little variability in the location of sale—restaurant, fast food, or carryout. State sales taxes for foods prepared outside the home are generally included as part of general sales tax provisions, although a few states specifically tax restaurant sales and nearly 1/3 of states specifically tax prepared/carryout foods. The majority of states tax restaurant sales at a higher rate than non-carryout food sold through grocery stores.

Conclusions and Implications: This presentation identifies one economic policy approach that states may take to begin to address the obesity issue. Although the data need to be linked with consumption data, these data provide a necessary first step to facilitate such analyses.