How Indiana’s Tax on Candy May Impact Your Halloween Purchases
When you think about Christmas, chances are the first image that pops into your head is Santa Claus putting gifts under the tree. When you think about Thanksgiving, I'll assume the first thing that comes to mind is a big meal with a perfectly roasted turkey as the centerpiece. And when someone says, "Halloween," I'm guessing one of the first things you think of is trick-or-treaters who will be coming by your house looking for candy. But did you know, you may pay more for some types over others thanks to what the state of Indiana defines as "candy?"
Does Indiana Have a "Candy Tax?"
I recently read an article written by Mark Hespen, co-host of the “Mornings with Mark and Sam” show on our sister station, 97.9 KICK-FM in Quincy, Illinois discussing how the state of Illinois applies a higher tax rate to certain types of candy than it does to other food items you get at the grocery store (Illinois applies a 1% tax on groceries). I was curious if Indiana had a similar tax law, so I did some digging and found that the answer is — kind of.
Unlike Illinois, Indiana does not tax general groceries which it defines as the following:
...substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and that are consumed for their taste or nutritional value.
Basically, the ingredients you buy to make a meal.
Nothing tastes better than tax-free food.
Candy on the other is a little more convoluted which shouldn't be surprising because the government is involved and they're the champions of making things more difficult than they need to be sometimes.
As Hespen notes in his article, certain types of candy in Illinois are taxed at 6.25%, which is the state's standard sales tax that applies to all different kinds of purchases. The same concept applies in Indiana. While the state does not have a "candy tax," it does apply the state sales tax, like our neighbor to the west, which is 7% for certain types.
Taxed Candy vs. Non-Taxed Candy
So, which is which? I'll give it to you straight from the horse's mouth. Here's how the Indiana Department of Revenue (IDOR) defines, "candy:"
Candy is defined as preparations 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...The term does not include any preparation that contains flour listed on the label or any preparation that requires refrigeration. Based on this definition, many items commonly considered to be candy, including many candy bars, are not classified as “candy” for Indiana sales tax purposes
Clear as a Snickers bar, right? Fortunately, the IDOR does provide a guide that clearly states what is and is not candy in its Sales Tax Information Bulletin #29 released in August 2023. Here are a few examples of what they define as candy:
- Almond Bark
- Breath Mints
- Chewing Gum
- Chocolate Chips
- Fruit Roll-Ups
While the bulletin doesn't list specific brands, items such as Skittles, Nerds, and Spree would fall into the category of candy because none of them list flour as an ingredient. For what it's worth, the state also considers Beer Nuts Party Mix and Honey Roasted Peanuts as candy because they are "a preparation of sweeteners, nuts, and flavorings in the form of pieces."
Here are some of the items not considered candy:
- Kit-Kat Bar
- Nestle Crunch
- Twix Bar
- Pixie Stix*
*Not considered a candy due to the fact it is "not bars, drops, or pieces."
So, if you're trying to save a little money on Halloween candy for the kids who will stop by your house looking to fill their buckets, stick with the candy bars. However, even those may cost a little extra if the county you live in a city or county that imposes a food and beverage tax, which is a whole different monster. You can learn more about that and whether or not it applies to you at Chamber of Commerce.org. Happy Halloween!
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