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A sour treat in Illinois as state taxes Halloween candy

This Halloween, the state of Illinois is offering more trick than treat.

In an effort to meet expenses, the state has recharacterized the way that it taxes candy for purposes of sales tax.

The state previously characterized candy as food, which meant that it was subject to a lower sales tax. The new tax rules, which took effect Sept. 1, however, redefined candy as, well, candy, and subjected it to the full state and local sales tax.

That means that in Chicago, which currently bears the not so desirable title of "highest taxed city in the nation," you can expect to pay 10.25% in sales tax for a candy bar.



But not just any candy bar.

In a twist that has confused consumers (and defied explanation), the tax specifically exempts candy which contains flour. The actual text of the act specifically states:
"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 preparation that contains flour or requires refrigeration.
So what does it mean for shoppers this Halloween season? You'll have to read labels.

Candy corn? Candy. Reese's Peanut Butter Cups? Candy. Snickers? Also candy. But Milky Way? Not candy. Twizzlers? Also not candy: Twizzlers and other forms of licorice candy contain flour.

And whose job is it to figure all of this out? Retailers. Adding to pressures in an already weak economic climate, Illinois lawmakers expect retailers to figure out what is -- and is not -- candy for purposes of collecting sales tax.

While larger retailers like Target may have the resources to dedicate to such a huge project, smaller retailers may find themselves in the unlucky position of spending manpower researching what qualifies as "candy" under the new law or dodging the law and hoping to not get caught. The IL Department of Revenue strongly recommends the former as opposed to the latter.

As tax policy goes, it's a ridiculous waste of resources. But it would be unfair to credit Illinois for having the worst sales tax treatment of a candy bar. Two years ago, Iowa passed a much maligned law that stated:
"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 shall not include any preparation containing flour and shall require no refrigeration.
Mmm, wait a minute... Did that seem eerily similar to you? Apparently, lawmakers in Illinois have been paying very close attention to what's happening in Iowa.

Quite frankly, it's not surprising. In a tough economic climate, lawmakers are increasingly looking to neighboring states for tax ideas... Could the candy tax be coming to your state next?

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