Peet's assumes one customer in six is a takeout customer. That includes purchases of bags of coffee that are not taxable. Klehs says Peet's is using a legitimate approach, as long as it stands up to an audit. While Starbucks' failure to charge taxes on taxable coffees is a problem, the State Board of Equalization believes it has bigger beans to roast. Bottled water is exempt, but carbonated water is taxed, along with takeout ice cream, newspapers and all alcoholic beverages.
Candy is exempt, but soda is taxed.
This tangle of tax law predates the gourmet-coffee craze and is unlikely to catch up with the times. Any new taxes, Klehs notes, must be passed by two-thirds in the Assembly and signed by the governor. Becki Bell contributed to this report. This page was designed and created by the Boulevards team.