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The Logic – or Lack Thereof – Used in Food Taxability Laws

Some of these items are tax exempt, some aren't

The Indiana Department of Revenue recently posted their updated list of exempt and taxable food products. Upon skimming the article, I couldn’t help but notice that in some cases, the items raise the question: What is the logic used in these increasingly granular taxability laws? For example, honey and nuts sold individually are both non-taxable, but a purchase of honey-roasted peanuts is subject to tax. Here are a few more:

  • Marshmallow crème is exempt, but marshmallows are not.
  • Kit Kat and Twix bars are tax-free but candy, confections, and Nestle Crunch bars are taxable.
  • Icing in tubes and containers of frosting are non-taxable, but cake decorations are not.
  • Specifically, “BBQ potato chips, BBQ sunflower seeds, and Fritos Honey BBQ Flavor Twists” are all exempt, followed later down the exempt list by “snack chips and pieces (including corn chips, pig skins, potato chips, pretzels, and trail mixes)”.

Additionally, if a seller provides utensils, or heats up the purchased food, the items are taxable. The logic seems more obvious here – even though this abridged version of legislation does not delineate which products can or cannot be sold with utensils – the seller’s intent is for the buyer to consume their purchased food without any additional preparation required. However, the stipulations above in particular deliver the impression that a higher number of paradoxes are created when taxability becomes more and more granular.

All confusion aside, without a system to manage such complicated and convoluted product taxability rules, the task of manually charging tax accurately becomes immeasurably more difficult. Avalara products and services take this burden away from businesses by building rules and exemption certificates into their automated tax calculation engine. Check out more about AvaTax and how it can help your business at https://www.avalara.com/products/avatax.


Avalara Author
Erin Wiggins
Avalara Author Erin Wiggins
Erin has been a sales tax content expert working with Avalara for over 3 years. Though she lives in California, she’ll always be a diehard Seahawks fan!