Food for Thought

Most tax disputes are resolved directly with the IRS or in Tax Court, and very few make it to "real" courts. When they do, billions of dollars can turn on the decision.

Sometimes, though, tax litigation turns on less profound issues.

A British court just confronted one such instance when it ruled that Pringles are potato chips.
You may not like Pringles yourself -- but you've certainly tried the uniformly-shaped chips from the tube-shaped can. Pringles start life as baked dough, with just 42% actual potato content.

They come packed in tubular can with foil-lined interior and resealable plastic cap.
That packaging is so distinctive that when its inventor died, his children honored his
wishes to actually bury his cremated ashes in one of those cans!

The issue reached court because Britain levies a 15% value-added tax on "products made from the potato, or from potato flour, or from potato starch." The tax naturally makes potato chips more expensive. So Proctor & Gamble, the chips' manufacturer, argued that Pringles don't look like chips, don't feel like chips, and don't taste like chips.

A lower court agreed with Proctor & Gamble. However, a Court of Appeals panel ruled last week that it wasn't the lower court's job to look into scientific or technical questions about the chips' composition, and that a child could give a "more relevant and sensible answer" than a food scientist. The court's decision could cost Pringles $31 million in tax per year.

This Memorial Day weekend marks the unofficial start of "summer." If you're like most clients, you'll spend your share of time around picnic tables loaded with snacks. Don't waste too much time crying for Pringles. But let this story serve as a lesson in just how far "tax planning" reaches into all of our lives. And don't be afraid to let us help you navigate your way through whatever tax questions you have!