This Halloween, tax professionals are offering tricks to help Americans stay within their candy-buying budget.
Yes, that’s right. Not Krazy Coupon Lady. Tax pros.
From a state sales tax perspective, candy’s usually treated in one of three ways: taxed like any other grocery item such as bread, milk and eggs, not taxed at all or taxed as a special category.
For some states, it can also be important to know what exactly is candy. In the two dozen states that are part of the Streamlined Sales and Use Tax Agreement (SST), 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.” The agreement’s meant to unify taxes across the United States to lower administrative burdens and make interstate commerce easier for businesses.
What’s missing from SST’s candy definition is flour. With that ingredient, candies with a cookie crunch like Kit Kat, Twix and Nestle Crunch aren’t considered candy and can end up being taxed differently than M&Ms or a Hershey’s bar in the same state, tax pros said.
“Base (tax) uniformity across states is good, but this particular definition leads to some interesting distinctions,” wrote Janelle Fritts, senior policy analyst with the Tax Foundation’s Center for State Tax Policy, in a blog. “If you bought a Hershey’s bar, it would be subject to sales tax. If you bought a Twix bar, it would be tax-free” in some instances.
This can be confusing and tricky. Below is a breakdown of what’s taxed and where to help you pick the right candy in the right state to save you as much money as possible this Halloween and give your wallet a treat.
(Remember, this discussion only pertains to state sales tax on candy. Local taxes may still apply regardless of what the state sales tax is.)
Which States Are Part of SST?
There are 24 SST states but remember, each one can still tax “candy” differently. SST states are Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee (still an associate member until it implements every uniform definition, rate structure, or administrative provision under SST), Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
Among them, Arkansas, Indiana, Iowa, Kentucky, Minnesota, New Jersey, North Carolina, North Dakota, Rhode Island, West Virginia and Wisconsin follow SST’s candy definition and tax accordingly. Flourless candies like Gummy bears, candy corn, Hershey’s kisses and Snickers are taxed (some up to 7%) but candies that contain flour like Twix, licorice, and Whoppers malted milk balls face 0% tax.
Tennessee taxes candies with flour like Sour Punch Straws and Ferrero Rocher at the discounted food tax rate of 4% but flourless candies like lollipops and Skittles at 7%.
All of the other states, except South Dakota and Utah, don’t tax any candy, flourless or not. South Dakota taxes all candy, flourless or not, at 4.2%, while Utah levies the same 3% reduced tax rate on both types of candies.
What About Non-SST States?
The following non-SST states don’t tax groceries. Candy bought for off-premise consumption is considered a grocery item, so they don’t tax any candy, with or without flour:
- Arizona
- California
- Louisiana
- Massachusetts
- New Mexico
- Pennsylvania
- South Carolina
- DC (although not a state, it falls into this category)
States that have zero state sales tax on any product also have tax-free Halloween treats. Those states are Alaska, Delaware, Montana, New Hampshire and Oregon.
Illinois, a non-SST state, uses the SST definition of candy to charge different tax rates. Candy without flour like plain or peanut M&Ms is taxed at the full state rate of 6.25%, while candy with flour like Pretzel M&M’s gets the lower 1% grocery tax.
Although Colorado is a non-SST state, it uses the SST candy definition and taxes flourless candy like cotton candy, gum and mints at 2.9% but exempts those with flour.
New York, Florida, Texas, Hawaii, Alabama, Idaho, Connecticut, Mississippi, Maryland, Missouri, Virginia and Maine tax all candy, regardless of flour content.
In New York, packaging and marketing determine the tax rate. “For example, pure maple sugar products are exempt as food unless displayed, labeled, or advertised as candy or confectionery. They are not candy merely because they are molded in the shape of a maple leaf or sold in individual quantities,” said New York’s Department of Taxation and Finance on its website.
What Does This Mean for Consumers?
The candy tax is scary complicated, but “it’s a small reminder that sometimes, the sweetest savings come down to the finest details,” wrote tax accounting experts at Tehrani & Velez, LLP on LinkedIn.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
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