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Streamlined Sales Tax Update

Several Baking Items Taxable Beginning January 1st

Dept. of Revenue expands list of eligible items that sales tax will apply to.

The Iowa Department of Revenue (IDR) has announced a change in the list of items that will be eligible for sales tax application. The big change that will affect food retailers is the decision by the IDR that packages of chocolate chips (drops) used for cooking, almond bark in pieces, shredded sweetened coconut, and baker’s chocolate will now be taxable, effective January 1, 2005.

This is a reversal of the previous department position last summer that these items would be exempt, because they had not been previously considered candy under Iowa law. The department cited the SSTP definition of candy. Under the SSTP’s definition of candy, they would be taxable.

SSTP Definition of Candy:

Candy means a preparation 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. Candy does not include any preparations containing flour which require no refrigeration.

In several meetings in the Spring of 2004, IGIA had met with IDR staff, and IDR repeatedly indicated that Iowa would take the position that if an item wasn’t defined as candy under previous Iowa law, it will not be considered a candy under SSTP, regardless of the SSTP definition of candy.

IGIA had pointed out last Spring that IDR’s interpretation was contrary to the SSTP definition, and wanted to make sure interpretations were correct the first time, as it would cause confusion to "go back and change" later, if the IDR was not correct.

The Department of Revenue acknowledged their mistake in a Streamlined Sales Tax Advisory Council meeting this fall. To alleviate problems for retailers, they delayed making the taxability changes effective until January 1, 2005. This reduced confusion during the holiday season, when demand for these items is highest.

Here is a list of many of the items that will become taxable January 1, 2005. This is not a complete list, as brands, sizes and variety vary by store. However, if you have any questions, please contact Jerry Fleagle at the IGIA office at 800-383-3663, or via email at jfleagle@iowagrocers.com.

ITEMS TAXABLE, EFFECTIVE January 1, 2005:

Almond Bark (all flavors) - All Brands

24oz.

BACO Chocolate Chunks

12oz.

Bakers Angel Flake Coconut-Sweetened

7oz.

Bakers Angel Flake Coconut-Sweetened

14oz.

Bakers Chocolate-Unsweetened

8oz.

Bakers Dippin Chocolate Dark-Microvave

7oz

Bakers Dippin Chocolate Milk Choc. Micro.

7oz

Bakers German Sweet Chocolate Bar

4oz.

Bakers Premium Shred Coconut-Sweetened

7oz..

Bakers Premium White Chocolate Bar

6oz.

Bakers Semi-sweet Chocolate

8oz.

Butterscotch Chips “Private or Store Label”

12oz.

Cake sprinkles used for decorating - Any brand

Dec-a-Cake Edible Decorations

Dec-a-cake Sprinkles (all varieties)

Edible decorations - Any Brand

Flake Coconut “Private or Store Label”

7oz.

Flake Coconut “Private or Store Label”

14oz.

Guitard Green Mint Chips

12oz.

Hershey Butterscotch Chips

12oz.

Hershey Milk Chocolate Chips

11.5oz.

Hershey Mint Chocolate Chips

10oz.

Hershey Raspberry Chips

10oz.

Hershey Semi-Sweet Chocolate Chips

12oz.

Hershey Unwrapped Kisses

9oz.

Hershey’s Cinnamon Chips

10oz.

Hershey’s Dark Chocolate Chips

12oz.

Hershey’s Milk Chocolate Toffe Bits

8oz.

Hershey’s Mini Chips

12oz.

Hershey’s Premium White Chips

12oz.

Hershey’s Unsweetened Chocolate Bar

8oz.

Kraft Carmels (with or without sticks)

Log House Cherry Chips

10oz.

M&M Mini baking Bits

12oz.

M&M Mini Baking Bits Semi-Sweet

12oz.

Milk Chocolate Chips “Private or Store Label”

12oz.

Nestle Butterscotch Morsels

12oz.

Nestle Choco-Bake

8oz.

Nestle Chocolate Chunks

11.5oz.

Nestle Milk Chocolate Chips

11.5oz.

Nestle Mini-Chocolate Morsels

11oz.

Nestle Peanut Butter Chips

11oz.

Nestle Premium White Chips

12oz.

Nestle Semi-Sweet Chocolate Morsels

24oz.

Nestle Semi-Sweet Chocolate Morsels

12oz.

Nestle Swirled Semi-Sweet Chocolate Chips

11oz.

Real Chocolate Chips “Private or Store Label”

24oz.

Real Chocolate Chips “Private or Store Label”

12oz.

Reese’s Peanut Butter & Milk Chocolate Chips

11oz.

Reese’s Peanut Butter Chips

10oz.

Wrapped Carmels

ITEMS STILL EXEMPT FROM SALES TAX:

Cake decorating sugar

Dec-A-Cake Gels

.75oz.

Dec-a-Cake Tube Icings

4.25oz.

Decorating Gels - Any Brand

Log House Raw Coconut Chips (not sweetened)

6oz.

Marshmallow Crème (all sizes and brands)

Marshmallows

Marzipan

Tube Icings - Any Brand

Click here to view the new IGIA table on food taxability on and after July 1, 2004

By now, most retailers in Iowa will have had the chance to attend one of the dozens of meetings the Iowa Department of Revenue has held around the state on changes on the collection of sales tax that will occur on July 1, 2004.

Streamlined Sales Tax was designed and has been enacted by the Iowa Legislature in the 2003 session, under the premise that 1) sales tax would be applied uniformly in those states that enact the SSTP, and 2) that it would enable states to eventually collect sales tax on internet purchases. The effect on the food industry is with the SSTP definitions and how they have changed from current law.

The Iowa Department of Revenue will continue to maintain a database noting which items are taxable and which are exempt, very similar to the one that was started in 1998, after industry confusion on which items should be taxed.

Here are changes worth noting for Iowa retailers: 

SSTP Definition of Candy:

Candy means a preparation 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. Candy does not include any preparations containing flour which require no refrigeration.

For Iowa:

The big change will be in the make up of candy with flour. Any item that previously fell under the definition of candy under Iowa law definitions, but contains flour (of any amount) will be exempt from sales tax. For example, Kit Kat bars, Milky Way bars, M&M Crispy (blue packages), Reece’s sticks will be exempt from tax because they contain flour. Currently they are taxed. Brach’s Bridge Mix will be exempt (has flour), but Brach’s Chocolate Stars will be taxable. It does not matter how much flour, or if it is rice, wheat, or another variety of flour. If it contains flour, it is not taxed.

Bottled Water- Whether it is carbonated or not, bottled water will be exempt from tax. If it is sweetened, it will be taxable (either carbonated or non-carbonated). A key for retailers to consider is if the water has "beverage" listed on its label. That usually means a sweetener has been added, making it taxable. Most all of the following bottled, drinking or purified water brands will be exempt:

Deja Blue, Crystal Clear, Poland Springs, Hinkley Springs, Hiland, Aquafina, Sasani, Chippewa, Evian, Ice Mountain Springs, Humboldt Springs, Fiji, and other store brands. This list is for example, and is not an inclusive list. Please check your bottled water SKU’s, and make adjustments.

No changes have been indicated in the food service/ deli area concerning sales tax status. IGIA was successful when the SST was passed in 2003 in getting exceptions for exemptions, which kept the sales tax applicability the same as it is presently.

This is a sample list taken from a large supermarket in the Des Moines area. Each retailer will be different, either in number of SKU’s, or products stocked or available.

The best way to use this list is as an example, and areas you will need to look at in each store.

If you have questions, or additional items you would like us to add to this list, or a ruling that needs to be requested of the Iowa Department of Revenue, email info@iowagrocers.com

 
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