Sales Tax & Compliance brought to you by >> Avalara Logo new12

Estimated reading time: 2 minutes, 56 seconds

By Elisa Azzali - Candies, CC BY 2.0,

To tax or not to tax?
Bars, drops, or pieces. Take a deep breath and repeat it. And again. That soothing mantra goes through my head whenever I’m determining product taxability in the candy section of a client’s inventory. Interrupt it with a word like “chunk,” and you’re looking at a problem. Sneak flour into a candy that doesn’t typically include it, and you might as well write off an afternoon on researching every similar candy to make sure that you haven’t been taxing all of them wrong.

The phrase “bars, drops, or pieces” comes directly from the Streamlined Sales Tax (SST) definition of candy. The Streamlined Sales Tax Governing Board exists to simplify sales tax laws, making compliance simpler in its member states. They do this by discussing various taxable items and agreeing upon a common definition for them. There are currently 23 SST member states, so if you sell candy in multiple states, it’s critical to understand the SST definition. The tax rates will vary, but “bars, drops, or pieces” will be a consistent determining factor throughout.

 
In order to differentiate cookies from candy, SST states exclude candy containing flour from the rule. A Kit-Kat may be a bar, but because it contains flour it isn’t technically candy. That doesn’t just go for flour made from grains, either. Anything that says flour is flour, including nut-based flours. This is important because candy gets taxed at a different rate from other types of food in many some states.
This type of taxability rule can cause anyone who manages sales tax to second-guess everything they thought they knew about your old friends in the candy aisle. Kit-Kats you can see coming from a mile away. They’ve got a crispy wafer inside them that you can immediately connect to flour. But what about Twizzlers and most kinds of licorice? Turns out they almost always have flour too. The same goes for Cow Tails and even some kinds of cotton candy.
 
SST only means that states have agreed upon product definitions; taxability is decided on a state by state basis. For a short time, for example, Avalara’s home state of Washington taxed candy per the SST definition. From June 1 through Dec. 1, 2010, purchases of Whoppers were tax exempt because they contained flour, while Snickers were taxed because they didn’t. However, as of Dec. 2, 2010, sales of all types of “candy” are exempt in Washington, even though the state’s definition of “candy” still excludes items that contain flour and don’t require refrigeration,
 
It’s clear that when it comes to candy, it’s easy to make a mistake.
 
What does this mean for your accounting practice? Having a firm grasp on the complexities of sales tax will help you educate your clients and catch their mistakes before an auditor does. But addressing the complexity of sales tax laws can be difficult. Adding technology such as sales tax automation to your firm’s service offerings is vital — not only to evaluate your clients’ level of tax compliance, but also to add to your firm’s bottom line and overall business growth.  

Gail Cole

Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.

Last modified on Wednesday, 20 March 2019
Read 10713 times
Rate this item
(0 votes)

Sales Tax Assessment Tool

The Accounting Top 100

Sales Tax Calculator

Social Leader board

The Accounting Top 100 social media leaderboard ranks accounting professionals based on their overall presence, influence, and engagement on social media platforms. Each user’s rank is determined by that user’s Klout Score in addition to a list of custom metrics, and all updated rankings are displayed in new leaderboards generated every two weeks.

Did you make the list?

Congratulations! You can now track your progress on the leaderboard by clicking “Follow us” at the top of the list. Want to get the word out about your new celebrity status? Share this page with all of your friends and followers so they can view and join in on this fun social activity.

Think you’ve got what it takes to make the Top 100?

Join for free today!

Disclaimer

Avalara’s Accounting Top 100 leaderboard (the “Leaderboard”) is assembled using a list of accounting professional users that’s curated by manual entry as well as by Rise.Global's internal Twitter search functionality. We reserve the right to change scoring metrics used for ranking and to exclude anyone from the list, in our sole discretion. The Leaderboard is not an endorsement, recommendation or sponsorship of any of the accounting professionals on the Leaderboard, and we do not make any representation or guarantee of their ability or reliability. Assessments by different methods or based on different information may yield different results. The Leaderboard is only a starting point to gather information about accounting professionals, and you should not rely on it to decide whether to hire an accounting professional.

For feedback and/or questions please contact a4a@avalara.com.

Visit other PMG Sites:

Template Settings

Color

For each color, the params below will give default values
Tomato Green Blue Cyan Dark_Red Dark_Blue

Body

Background Color
Text Color

Header

Background Color

Footer

Select menu
Google Font
Body Font-size
Body Font-family
Direction
PMG360 is committed to protecting the privacy of the personal data we collect from our subscribers/agents/customers/exhibitors and sponsors. On May 25th, the European's GDPR policy will be enforced. Nothing is changing about your current settings or how your information is processed, however, we have made a few changes. We have updated our Privacy Policy and Cookie Policy to make it easier for you to understand what information we collect, how and why we collect it.
Ok Decline