Tagalong Tax Policy
"Bad things happen to people who don't buy my cookies, sir."
They were waiting at the exit. Two girls, their leaders, a card table, and several cases of cookies. The group was braving the cold, rainy Saturday in front of an Albertsons supermarket in Boise, Idaho. "Would you like to buy some Girl Scout cookies?" a voice asked. There can only be one answer. I selected (for research purposes only) three boxes of Thin Mints and two boxes each of Tagalongs and Trefoils. One of the leaders boxed up my order and handed me a coupon for a chance to win five cases of cookies. The coupon thanked me for "investing in a girl" and noted that the purchase helped the Girl Scouts build five skills (printed on the side of each box of cookies): goal setting, decision making, money management, people skills, and business ethics. Then one scout referred to her quick reference price list and determined that my order of seven boxes would cost $26.25. I asked if that included the 6 percent Idaho sales tax. It did.
Idaho is known for its wild rivers, majestic mountains, high desert expanses, potatoes, and a certain football field with blue turf. But Idaho also has savvy Girl Scouts, popular Girl Scout Cookies and a broad-based sales tax. Because of this confluence, Idaho is one of only two states that tax the sale of Girl Scout cookies (the other is Hawaii). In February 2013 the Girl Scouts decided to do something about Idaho's refusal to be a tax tagalong. The scouts lobbied state lawmakers to exempt Girl Scout cookies from the sales tax. The effort failed. But the attempt drew significant media attention, from the pages of the Idaho Statesman to the Wall Street Journal.
The local fuss over taxing cookies in Idaho may seem like a minor issue unworthy of analysis. But the debate is a fascinating microcosm of broader tax policy issues -- like horizontal and vertical equity, bright-line tests versus facts and circumstances tests, normative aspirations versus political realities, and subsidies for charities via tax breaks versus cash support -- that apply beyond both the Girl Scouts and Idaho. After providing some background, this article reviews the tax policy issues raised by the Girl Scout cookie situation and recommends that Idaho and other states enact a sales tax exemption for short-term, nonprofit fundraisers to reconcile good politics with good tax policy.
Cowan, Mark J.. (2013). "Tagalong Tax Policy". State Tax Notes Magazine, 617.