While some food items in Iowa’s grocery and convenience stores are not subject to state taxes, some delectable edibles are taxed. The state’s chief tax collection agency is sending out new guidelines on what should and shouldn’t be taxed.
Victoria Daniels, at the Iowa Department of Revenue, briefed a state legislative committee. “It’s very important that the department maintains its compliance pretty much to the letter and what this rule has to do with is the definition of candy,” Daniels says.
Under the revised guidelines, candy-coated fruit, candy-coated popcorn and marshmallows will now be called candy and taxed accordingly. One lawmaker asked about a snack he was munching on.
“That’s candy,” she says, laughing. “Chocolate-covered peanuts, that’s candy.” States can choose whether to tax groceries. Iowa does not. Retailers will also be advised that energy bars may need to be taxed if they don’t contain flour.
Daniels says her heart goes out to retailers who are trying to keep up with the changes. “If something’s in a gray area, like a nutrition bar or a cookie, and it could potentially be candy, that’s when you would apply these rules,” she says. “You would look at it and say, ‘Is it a bar or a drop or a piece? Does it have flour in it?'”
Other food items that will now be taxed as candy include caramel-coated or other candy-coated apples or other fruit, and licorice that doesn’t contain flour or require refrigeration. State revenue officials say the effect of the change on the state treasury will be minimal.
