Is candy taxed? Here’s what to expect this Halloween

Halloween is a serious time for business, despite the sweet, whimsical, or haunting artifacts on the shelves. Every sale of a pointy black hat or bag of candy matters — as does getting the tax right on those sales.

It can be harder than you think, especially for businesses that sell tricky products like candy into multiple jurisdictions.

In a candy-coated nutshell:

  • Some states tax candy and other “food and food ingredients” the same
  • Some states tax candy differently from other sales of food and food ingredients
  • Some states don’t tax candy at all

A list of which states tax candy and which states don’t tax candy is below. But first, it’s important to know how states define “candy,” for tax purposes.

What is candy?

Merriam-Webster defines “candy” as “a confection made with sugar and often flavoring and filling.” Some states boil the definition down further.

How Streamlined Sales Tax member states define candy

The 24 states that are members of the Streamlined Sales and Use Tax Agreement (SST) define candy as “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.” Preparations that contain flour or require refrigeration do not fall under the SST definition for “candy.” 

So, a Reese’s Peanut Butter Cup, which doesn’t have flour, may be taxed differently than a Twix bar, which contains flour. Tricky stuff.

It’s important to note that although all SST states adhere to the same definition of “candy,” they don’t all tax candy the same way. 

States that tax candy like other “food and food ingredients”

Ten states generally consider candy to be like any other food, and so generally tax it the same.

Alabama: The general state sales tax rate plus applicable local taxes generally apply to candy and other food products for human consumption, but vending machine sales are subject to a 3% state sales tax, plus various local rates. There have been numerous attempts to exempt food/groceries from Alabama sales tax, most recently in 2022, to no avail.

Hawaii: The general excise tax (GET) rate applies to candy and other food.

Idaho: The general sales tax rate applies to candy and other food.

Kansas (SST member): The tax on food and food ingredients, including candy, will drop from the general rate to 4% on January 1, 2023; the rate will drop to 2% effective January 1, 2024; and candy and other food will be fully exempt effective January 1, 2025.

Mississippi: The general sales tax rate applies to candy and other food.

Missouri: A reduced state sales tax rate of 1.225%, plus applicable local sales tax, applies to candy and other food for home consumption.

Oklahoma (SST member): The general sales tax rate applies to candy and other food and food ingredients. However, food sold through vending machines is exempt.

South Dakota (SST member): The general sales tax rate applies to candy and other food.

Utah (SST member): A reduced rate of 3% (1.75% state tax, plus 1.25% local taxes) applies to candy and other grocery foods.

Virginia: The tax on candy and other food and food ingredients drops from 2.5% to 1% effective January 1, 2023.

States that don’t tax candy like “food and food ingredients”

Close to 20 states don’t consider candy to be the same as other “food and food ingredients” and therefore tax candy differently from other foods.

Arkansas (SST member): Candy and soda are subject to the general sales tax rate. As of January 1, 2019, a reduced state tax rate (0.125%) applies to sales of food and food ingredients.

Colorado: Candy (including chewing gum) and soda are 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 and soda, 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%. From July 1, 2022, through June 30, 2023, the 1% sales and use tax on many retail sales of groceries is suspended

Indiana (SST member): Candy and soda are 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): The general sales tax rate applies to candy and soda; food and food ingredients are generally exempt.

Kentucky (SST member): Candy and soda are taxed at the full rate, as is food sold through vending machines; food and food ingredients are generally exempt.

Maine: Candy and soda are taxed at the general rate; grocery staples are generally exempt.

Maryland: The general sales tax rate applies to candy and soda; other food for home consumption is generally exempt when sold by a grocery store or market.

Minnesota (SST member): Candy and soda are taxed at the regular rate; food and food ingredients are exempt.

New Jersey (SST member): Candy and soda are subject to the general sales tax rate; food and food ingredients are exempt.

New York: Candy and soda are generally taxable; groceries are generally exempt.

North Carolina (SST member): Candy and soda are 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 generally exempt from the state sales tax but subject to a 2% local food tax. 

North Dakota (SST member): Candy and soda are subject to sales tax; food and food ingredients are exempt.

Rhode Island (SST member): Candy and soda are subject to sales tax; food and food ingredients are exempt.

Tennessee (Associate SST member): Candy is subject to the full rate of tax (7%); food and food ingredients are taxed at a reduced rate of 4%.

Texas: Candy and soda are subject to the general rate of sales tax; food and food ingredients are generally exempt.

Wisconsin (SST member): Candy and soda are subject to sales tax; food and food ingredients are exempt.

States that exempt candy

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% 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 gumball 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. 

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 subject to New Mexico gross receipts tax (GRT), but they’re also eligible for a 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%.

There’s no general sales tax in Alaska, Delaware, Montana, New Hampshire, or Oregon, but Alaska allows local sales taxes.

Feed the sweet tooth

After subdued celebrations in 2020 and 2021 because of COVID-19, Halloween is coming back. According to the National Retail Federation, about 69% of consumers plan to celebrate Halloween in 2022. Total Halloween spending is expected to reach $10.6 billion; Halloween candy spending could hit $3.1 billion.

While horrifying for medical professionals, that figure is exciting to sellers of candy. However, it can turn into a nightmare if they get sales tax wrong. 

Automating sales tax compliance allows businesses to deliver taxability rules and sales tax rates to point-of-sale systems in real time, no matter what type of candy they sell or where they sell it. 

 

This post was updated October 26, 2022; it originally published October 8, 2019.

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