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Wednesday, May 12, 2010

Washington State defines candy 



Before a retail item can be taxed, it has to first be defined and categorized by a taxing authority. Occasionally, hilarity ensues. The News Tribune in Washington State reports:
The taxman is about to lay a finger on your Butterfinger, but he’ll give you a break on that Kit Kat bar.

Candy, like other food, is exempt from sales tax. That changes June 1, when a tax on candy and gum approved this year by the Legislature takes effect.

But not all sweet treats are considered candy, in the eyes of the state Department of Revenue.

In a letter dated Tuesday and going out in the mail later this month, the department will tell retailers how to figure out which products are subject to Washington’s 6.5 percent sales tax and local add-ons. It’s a process many other states have gone through, but it has some sellers and shoppers here scratching their heads.

“If it’s got chocolate around it, it’s candy,” Ruth Ann Behunin of Lakewood protested as she bought gifts for family at Johnson Candy Co.

Not according to the new law.

Here’s a rule of thumb: If it contains flour or requires refrigeration, you probably won’t pay tax on it.

Snickers is candy, but a Snickers Cruncher is tax-free.

Shoppers may know candy when they see it, but defining it legally is harder. The definition used by Washington was crafted nearly a decade ago by the Streamlined Sales Tax Governing Board, which is trying to make state tax codes more uniform.

Previously, each state had its own definition. “We had states that looked at Twix bars as a chocolate-covered cookie, and the state right next door … looked at that as a candy bar with a cookie center,” said Scott Peterson, executive director of the governing board.
The new Secretary of the Department of Revenue in Washington State is none other than George Costanza.





This tax has the potential to be somewhat regressive, depending upon the precise manner in which consumption of sweets correlates with income levels in the state.

Exit question: has anyone tried a tax-free Snickers Cruncher yet?

6 Comments:

By Blogger randian, at Thu May 13, 05:19:00 AM:

Will candy manufacturers start putting trivial amounts of wheat flour into their recipes in order to avoid this tax? Or, since the tax is on the consumer and not on them, will they not care about the tax?  

By Anonymous Anonymous, at Thu May 13, 07:11:00 AM:

Pretty common, actually. Memory fails me, I took the tax class in 1995, but in some States, cookies are tax free if sold on the bread aisle in the supermarket and taxable if sold on the cookie aisle.  

By Blogger joated, at Thu May 13, 09:21:00 AM:

Just one more example of the insanity of our tax codes.  

By Anonymous feeblemind, at Thu May 13, 11:38:00 AM:

Re randian: Intriguing thought. I would think candy makers would be looking for loopholes to steer their products through.

I would think they would avoid the tax if possible. A price hike is a price hike and a demand depressant, whether or not they receive the revenue.

Would an onerous tax on candy turn children into future conservatives?  

By Anonymous SouthernRoots, at Thu May 13, 12:30:00 PM:

The state DOR categorized and classified 3267 individual "candies". 263 were exempted.

I wish they had taken as much time and effort in finding real spending cuts as they did in finding tax increases.  

By Blogger The Leading Wedge, at Sat May 15, 07:50:00 PM:

Ref the potential regressiveness of this tax. I live in the socialist paradise Norway. I have noticed that nearly all the taxes - the 25% VAT being the most noticeable - are regressive. Taxes account for about 80% of the price of gasoline.

Now they're talking about a stiff rush hour toll. I'm all right economically and prefer to drive to work. If this rush hour toll can clear the roads, well, I'm all for it.

It is entertaining to watch socialists repeatedly contradict their own ideology. In fairness, they're not the only politicians to do so.  

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