Tax Analysts Blog

Things That Make You Nuts

Posted on Apr 24, 2013

Avalara is a company that designs software to help companies automate their sales tax compliance. Perhaps it is fitting, then, that an Avalara blog post addressed the taxation of candy. It’s one of the areas of state sales tax laws that can (pun intended) make you go nuts, but it also highlights the unnecessarily complex nature of state sales tax laws.

According to data from the Tax Foundation, in 16 states, candy is not treated as groceries. Why does this matter? Groceries are generally exempt from sales tax. If candy is not considered a grocery, it will be subject to tax. But then the question becomes: what differentiates candy from groceries? We eat candy, so what makes candy different from other food? The answer is not simple.

According to the Streamlined Sales Tax agreement, the definition of candy is a “preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. ‘Candy’ shall not include any preparation containing flour and shall require no refrigeration.”

So pursuant to that definition, a sweet with flour is not candy, while a sweet without flour is. For example, a Hershey’s chocolate bar is candy, while a Twix bar is not. Ditto for Kit Kat bars. Makes sense, right? But what about Twizzlers? Seems a solid bet that licorice is candy, but it isn’t because flour is a top ingredient.

It all seems a bit absurd, but lines have to be drawn somewhere, don’t they?

Read Comments (2)

amt buffApr 24, 2013

The law should have set an in lieu tax rate of 5%. Seller sends the state 5%
regardless of what the state's tax rate actually is. Simple and easy, with
almost the same revenue effect.

Christopher HarrisApr 24, 2013

I believe necessities are not taxed. As well as tea.

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