One thing the Rules of Thumb blog from MoneyThumb has noticed is that we as Americans celebrate Halloween on a grander scale than ever before. But what may surprise our readers is that not only are Halloween costumes big business for retailers these days, one of the most purchased items during the Halloween season is candy.
For accountants who handle the finances of retailers selling candy, you may be interested to know that about 90 percent of Americans are expected to buy candy for Halloween this year. Together, they’ll spend $2.6 billion on candy.
After the fiasco concerning sales tax across state lines brought on by the court case of South Dakota vs Wayfair--which we wrote about here--, our accountant readers with Halloween retailing clients selling candy will also find the following information we gleaned from CPA Practice Advisor very helpful:
Spooky Retail: A State-by-State Guide to Halloween Candy Taxes.
Candy is food and taxed the same as “food and food ingredients”
Ten states generally consider candy to be like any other food, and so generally tax it the same.
- Alabama: Candy and other food products for human consumption are taxed at the full rate of state and local sales tax unless sold through a vending machine (vending machine sales are subject to a 3 percent state sales tax, plus various local rates). There have been attempts to exempt food/groceries at both the state and local level as recently as this year, to no avail.
- Hawaii: Candy and other food are taxed at the general rate.
- Idaho: Candy and other food are taxed at the general rate.
- Kansas (SST member): Candy and other food and food ingredients are taxed at the general rate.
- Mississippi: Candy and other food are subject to the regular sales tax rate in Mississippi.
- Missouri: Candy and other food for home consumption are subject to a reduced state sales tax rate of 1.225 percent, plus applicable local sales tax.
- Oklahoma (SST member): Candy and other food and food ingredients are taxed at the regular rate. However, food sold through vending machines is exempt.
- South Dakota (SST member): Candy and other food are taxed at the regular rate.
- Utah (SST member): Candy and other food and food ingredients are taxed at a reduced rate of 3 percent (1.75 percent state tax, plus 1.25 percent local taxes). Lawmakers have attempted to exclude candy from the definition of food and food ingredients, which would subject it to the full rate of tax, but their efforts have been unsuccessful as of this writing.
- Virginia: Candy and other food and food ingredients are taxed at a reduced rate of 2.5 percent.
Candy isn’t food and is taxed differently from “food and food ingredients”
Close to 20 states don’t consider candy to be the same as other “food and food ingredients.” Consequently, they don’t treat it the same as food for tax purposes. Remember that SST states don’t consider candy-like treats containing flour or requiring refrigeration to be “candy.” Thus, while a Reese’s Peanut Butter Cup may be subject to sales tax, a Kit Kat bar or Twix bar would be exempt or taxed at a reduced rate for food and food ingredients.
- Arkansas (SST member): Candy and soft drinks have been taxed at the regular state and local sales and use tax rate since January 1, 2018. “Candy” excludes products that contain flour (e.g., Kit Kat or Twix) or require refrigeration, so these deceptively candy-like products qualify for the reduced state sales tax rate that applies to “food and food ingredients” (1.25 percent) — unless they’re sold at a concession stand, the seller’s prepared food sales percentage is greater than 75 percent, and utensils are made available, in which case the general sales tax rate applies.
- Colorado: Candy (including chewing gum) is generally subject to the full state sales tax rate, but grocery food items are generally exempt from state sales tax. Cities have the right to exempt or tax food for home consumption and food sold through vending machines. However, since candy isn’t considered “food,” it isn’t eligible for a local exemption.
- Connecticut: Candy is generally taxed at the full rate. Vending machine sales of candy are taxable if priced at $0.51 or more. Candy sold in educational institutions and certain health and care facilities is exempt, and grocery foods are generally exempt.
- Florida: Sales tax applies to most sales of candy, but grocery foods are generally exempt.
- Illinois: Candy is subject to the general rate; other grocery foods are subject to a reduced rate of 1 percent.
- Indiana (SST member): Candy is generally taxed at the full rate, although baking chocolate and similar products intended for use in cooking are generally exempt (unless in the form of bars, drops, or pieces, and are sweetened). Other food and food ingredients are generally exempt. As of July 1, 2019, food sold through vending machines is taxable if generally taxed and exempt if generally exempt (all vending machine sales were taxable prior to that date).
- Iowa (SST member): Candy is taxed at the full rate; food and food ingredients are generally exempt.
- Kentucky (SST member): Candy is taxed at the full rate, as is food sold through vending machines; food and food ingredients are generally exempt.
- Maine: Candy is taxed at the general rate or at the higher rate for prepared food; grocery staples are generally exempt.
- Maryland: Candy is taxed at the general rate; other food for home consumption is generally exempt when sold by a grocery store or market.
- Minnesota (SST member): Candy is taxed at the regular rate; food and food ingredients are exempt.
- New Jersey (SST member): Candy is subject to the general sales tax rate; food and food ingredients are exempt.
- New York: Candy is generally taxable; groceries are generally exempt.
- North Carolina (SST member): Candy is subject to the full rate of state and local sales and use tax, as is food sold through a vending machine. Other food and food ingredients are exempt from the general rate but subject to a 2-percent food tax. Some local sales and use taxes apply to food that’s otherwise exempt.
- North Dakota (SST member): Candy is subject to sales tax; food and food ingredients are exempt.
- Rhode Island (SST member): Candy is subject to sales tax; food and food ingredients are exempt.
- Tennessee (Associate SST member): Candy is subject to the full rate of tax (7 percent); food and food ingredients are taxed at a reduced rate of 4 percent.
- Texas: Candy is subject to the general rate of sales tax; food and food ingredients are generally exempt.
- Wisconsin (SST member): Candy is subject to sales tax; food and food ingredients are exempt.
Candy is necessary and exempt
Some states exempt food and food ingredients (or food for home consumption) because they consider it essential. And some of them include candy in that clustering.
- Arizona: Candy and grocery food sales are exempt.
- California: Candy and other food and food ingredients are generally exempt. However, tax applies to 33 percent of gross receipts from vending machine sales of candy. Bulk sales of candy through a coin-operated machine are exempt when sold for 25 cents or less (think gum-ball machines).
- Georgia (SST member): Candy and other food and food ingredients are exempt from state sales and use tax but subject to all local sales taxes except the special purpose local option sales tax (SPLOST) imposed in connection with equalized homestead option sales tax (EHOST).
- Louisiana: Candy and other food and food ingredients are generally exempt; however, local taxes may apply.
- Massachusetts: Candy and other food and food ingredients are exempt. There have been efforts to eliminate the exemption for candy and soft drinks in recent years, to no avail.
- Michigan (SST member): Candy and other food and food ingredients are exempt, including food sold through vending machines.
- Nebraska (SST member): Candy and other food and food ingredients are exempt.
- Nevada (SST member): Candy and other food and food ingredients are exempt, though candy prepared for immediate consumption is taxable.
- New Mexico: Candy and grocery foods are eligible for a New Mexico gross receipts tax (GRT) deduction.
- Ohio (SST member): Candy and other food and food ingredients are exempt if consumed off-premises, but taxable if consumed on-premises.
- Pennsylvania: Candy and other food and food ingredients are exempt.
- South Carolina: Candy and other food and food ingredients are exempt from state sales tax, though local taxes may apply.
- Vermont (SST member): Candy and other food and food ingredients are exempt.
- Washington (SST member): Candy and other food and food ingredients are exempt.
- West Virginia (SST member): Candy and other food and food ingredients are exempt.
- Wyoming (SST member): Candy and other food and food ingredients are exempt.
- District of Columbia: Candy and other food and food ingredients are exempt; however, candy and other snack foods sold through vending machines are taxed at a rate of 5.75 percent.
We hope the above guide courtesy of CPA Practice Advisor will cover any questions our accountant readers may have about the sales tax laws in and across any particular US State. Have a fun and very spooky Halloween!
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