By Katherine Mangu-Ward
At Bruegger's Bagels in Albany, New York, getting your bagel sliced is going to cost you an extra 8 cents. Not because the owner is a cheap jerk, although that's what many customers thought when the price increase was initially posted this summer. Instead, the use of knives in a bagel shop magically summons the tax man:
n New York, the sale of whole bagels isn't subject to sales tax. But the tax does apply to "sliced or prepared bagels (with cream cheese or other toppings)," according to the state Department of Taxation and Finance. And if the bagel is eaten in the store, even if it's never been touched by a knife, it's also taxed.
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This isn't an isolated incident, and stories like this are likely to become more common as state governments that are out of money start looking for ways to nickle and dime their taxpayers.
The artificial lines between necessary foodstuffs and taxable luxury items are particularly rich territory. For instance, in Colorado, Washington, and a few other states, a Kit Kat counts as tax-exempt food, but a Hershey bar is taxable candy, thanks to the presence of flour. Keep an eye out for more.