North Carolina, Candy and Sales Tax: Story Problem or Real Life?
- Sales Tax News
- Jan 23, 2014 | Gail Cole
Susie purchases a Kit Kat at Krishna Food Mart in the Triad area of North Carolina for $1.00. She pays a total of $1.07.
Billie purchases a Kit Kat at Sheetz in the Triad area of North Carolina for $1.00. He pays a total of $1.08.
Joe purchases a Kit Kat at an unnamed store in the Triad area of North Carolina for $1.00. He pays a total of $1.02.
Why are the totals different?
Is this a 6th grade story problem from hell? No. It’s real life for shoppers and retailers in North Carolina.
Candy isn’t food
If your mama always told you, “Candy is not a food,” she may have been more right than she knew. Food is defined under North Carolina law as: “Substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value….” It might seem that candy meets that definition (it is often consumed for its taste if not its nutritional value). But under North Carolina law, candy has its own definition: “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.” However, the law goes on to clarify: “The term does not include any preparation that contains flour.”
So candy that contains flour is not candy. Does that mean food meeting the definition of candy is not food?
Semantics aside, in North Carolina:
- “Candy” is subject to the combined state and local sales tax rate; and
- “Food and food ingredients” (excluding alcoholic beverages and tobacco) are subject to a lower rate of 2%.
Kit Kats contain flour. Ergo they are food. Not candy. Sorry, Mama.
The story called life
Back to the story problem that really happened.
WFMY in North Carolina reports that half of a random sampling of stores (5 out of 10) charged too much sales tax on Kit Kats. Three stores (Krishna Food Mart, Kim’s Grocery and Jay’s Grocery) charged 7 cents. Sheetz and Summit Shell Xpress Mart charged 8 cents. They all should have charged 2 cents.
The manager of the Krishna Food Mart, when confronted with the error, said the different tax rate for candy containing flour was news to him. He wondered why the tax code had to be so complex. People interviewed for the story concurred, saying, “That’s wrong. Something needs to be changed about that.”
As the Tax Foundation notes, the Streamlined Sales Tax Governing Board tackled the issue, it ended up “developing a six page document on the word” flour. “You seriously can’t make this stuff up.”
Retailers don’t have to make it up, or even agree with it. They do have to comply with the law of the land and tax every item they sell at the correct rate, be it 2%, 6.75%, or 9%.
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