The Purpose of Extra-Large Marshmallows? A U.K. Court Weighs In


A court in Britain looked at a bag of 27 marshmallows this summer and considered the future of the soft, sweet treats: Were these marshmallows destined to be eaten straight from the bag or turned into s’mores?

The question may seem straightforward, but a tax tribunal presented with the sweets evaluated them in granular detail to determine if a food product called Mega Marshmallows would be subject to the same standard retail sales tax as regular marshmallows, which are about an inch shorter and about a half-inch thinner.

The court, known as the First-Tier Tribunal, examined the Mega Marshmallow packaging, past and present, noting that one version included a cartoon chef next to the words “baking buddy”; inferred that people were more likely to roast the marshmallows over an open flame than eat them as a snack; and assessed whether marshmallows tasted better raw or roasted.

“Larger marshmallows are equally palatable whether eaten as a snack or after roasting,” the court determined in a nine-page ruling issued last month.

The court’s ruling is very detailed. Explaining a quote on the marshmallow’s packaging, the court wrote, “The reference to a great American tradition is to the tradition of roasting marshmallows over a campfire.”

The court’s intensive deliberations ultimately favored the maker of the marshmallows, Innovative Bites Limited, which was allowed to sell Mega Marshmallows with a 0 percent value-added tax, or VAT, which is similar to sales tax.

The court said that unlike standard marshmallows, which are subject to a VAT of 20 percent, these slightly larger marshmallows were not a confectionary and should therefore be subject to a 0 percent VAT, like most food.

“The fact that it is sold and purchased as a product specifically for roasting, the marketing on the packaging of the product which confirms that purpose, the size of the product which makes it particularly suitable for roasting and the fact that it is positioned in supermarket aisles in the barbecue section during the summer months when most sales are made and otherwise in the world foods section, leads us to that conclusion,” the court said.

It has become routine for tax tribunals in Britain and other countries that use VAT to examine in detail foods, games and even television personalities to decide how they should be taxed.

His Majesty’s Revenue and Customs, the British tax collector, issues VAT guidelines, but there are many gray areas that leave room for companies to appeal its rulings.

In April, the tax tribunal ruled that a number of flapjacks, or a sweet oat bar, were sweets and not cakes and were therefore subject to the tax. In 2017, the European Court of Justice ruled that the card game bridge is not a sport and was also subject to VAT.

Perhaps the best-known case is about the Jaffa cake, a spongy cookie layered with jam and coated with chocolate. In 1991, His Majesty’s Revenue and Customs unsuccessfully challenged the treat’s designation as a cake, so Jaffa cakes are not subject to consumer tax.

“Jaffa cakes had characteristics of both cakes and biscuits, but the tribunal thought they had enough characteristics of cakes to be accepted as such,” Britain’s government notes in its guidance.

“The truth is there is no proper rationale for any of these things because these rules were not thought for these gray areas,” said Rita de la Feria, a professor of tax law at the University of Leeds.

Professor de la Feria said that tax reductions for certain products were meant to protect consumers by lowering the cost of foods considered more meritorious. Confectionaries, alcoholic drinks and ice cream receive the standard tax while vegetables and fruit do not.

In practice, she said, if a product’s tax is reduced, it’s the manufacturer who benefits because the company can either keep the price of a product the same after the tax cut and increase its profits or sell more at a lower price. And it is people who consume the most that benefit the most from reduced taxes on goods.

Professor de la Feria said it didn’t make sense to have courts and the tax authorities spend so much time and taxpayer money discussing how often people eat marshmallows and in what situations they are consumed.

This kind of intensive scrutiny of snacks, biscuits and cakes will continue trickling through British courts as long as tax policy remains the same, she said.

“If two years from now there is a big marshmallow that people can buy off the shelves and don’t use it as s’more, it will still be subject to a reduced rate until H.R.M.C. decides, ‘OK, this is not the same thing, let’s take it court,’” she said. “It could be another 10 years to decide something like that.”