Regarding The Candy and Soft Drink Sales Tax

The State of Colorado recently passed a bill eliminating the sales tax exemption on soft drinks and candy, which will go into effect on May 1, 2010.

Food for home consumption is exempt from state sales tax, but apparently candy and soft drinks will no longer be considered “food” for tax purposes. The bill basically amounts to a “tax on sugar” of sorts, but the way it defines the categories of soft drinks and candy is more than a bit confusing.  Most of us are left wondering just how much the cost of those products will be affected. Well, it depends…

• Businesses that purchase soft drinks and candy for the office as an employee perk or to give away to clients are already paying (or should be paying) state and city sales tax on those items, which are considered a business expense. No change there!

• Soft drinks purchased at restaurants are already being taxed – no change there either!

• At the supermarket, convenience store, etc., you will be charged sales tax on soft drinks and candy, just like you pay tax on paper, soap, and other non-food items. Prices will not go up per se, but your cost on these items will go up by 2.9%.

• When you purchase items through a vending machine, the price will already include sales tax and the vending operator is responsible for remitting those funds to the corresponding state and city tax agencies.  The state sales tax on candy and soft drinks will now cost vending operators almost 3 cents per dollar of revenue on certain items and some operators may decide to raise their prices, while others may choose to absorb the cost rather than risk a decline in sales – so we’ll probably see some price increases in vending machines.

And which are the items to be taxed as a result of this bill? What exactly falls under the categories of candy and soft drinks? Ah, here comes the fun part!

According to the bill, soft drinks are sweetened non-alcoholic beverages, so it would follow that soda pop, most iced teas, sports drinks, energy drinks, etc, should be taxed - but not juice, nor drinks that contain at least 50% juice, milk, or milk substitutes (like soy), nor unsweetened drinks such as seltzers.

The bill goes on to define candy as “a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruit, nuts, or other ingredients or flavoring in the form of bars, drops or pieces. Candy does not include any preparation containing flour and shall require no refrigeration.”
Okaaay… that means it excludes cookies, muffins, or pastries, because those have flour, and also ice-cream even if it contains candy, because it needs to be refrigerated. Cookie-like candy bars like Kit Kats or Twix and licorice-type candy like Twizzlers should also be excluded because – who knew? – they contain wheat flour… 

The details of the bill are still being fine-tuned, but it’s a pretty sure bet that the final result will be an accounting nightmare for retailers and vending companies, and a slight increase in the cost of certain items for consumers.

Personally, I just think it’s a travesty to tax any kind of chocolate – isn’t that one of the main food groups???

For additional clarification – or confusion – you can read about the changes on the Colorado Department of Revenue website.

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One thought on “Regarding The Candy and Soft Drink Sales Tax

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