Location:
FOOD PRODUCTS; TAXATION;
Scope:
Background;

OLR Research Report


November 7, 2012

 

2012-R-0490

TAXES ON SOFT DRINKS OR CANDY

By: Rute Pinho, Associate Analyst

You asked which states impose a tax on soft drinks or candy. This report updates the information in OLR report 2002-R-1004.

SUMMARY

We identified four states (Arkansas, Tennessee, Virginia, and West Virginia) that levy an excise tax on soft drinks, but none that levy an excise tax on candy.

While most states do not impose excise taxes on candy or soft drinks, many tax these goods at a higher sales tax rate than other grocery food. Of the 46 jurisdictions (45 states and the District of Columbia) that impose a state sales tax, 32 exempt grocery food purchases from the sales tax and 7 tax such purchases at a reduced rate. Many of these 39 jurisdictions exclude candy or soft drinks from the definition of grocery food, thus making them taxable or subjecting them to the state's general sales tax rate. In all, 18 jurisdictions tax candy and 23 tax soft drinks at a higher rate than other groceries.

SOFT DRINK EXCISE TAXES

Four states (Arkansas, Tennessee, Virginia, and West Virginia) levy excise taxes on soft drinks. Table 1 below briefly describes each state's tax. The states vary in how they levy the tax. Arkansas and West Virginia base the tax on volume, while Tennessee and Virginia base it on gross receipts.

Table 1: State Excise Taxes on Soft Drinks

State

Tax Rate

Paid By

Arkansas

$2 per gallon of soft drink or simple syrup

$0.21 per gallon of bottled or canned soft drink product or

$0.21 for each gallon produced by powders or base products

Distributors, manufacturers, and wholesale dealers on the first sale in Arkansas

Tennessee

1.9% of gross receipts derived from manufacturing, producing, or importing bottled soft drinks

Manufacturers, bottlers, and importers of bottled soft drinks

Virginia

Excise tax on gross receipts from soft drink sales as follows:

$50 if the gross receipts are $100,000 or less

$100 if the gross receipts are between $100,000 and $250,000

$250 if the gross receipts are between $250,000 and $500,000

$750 if the gross receipts are between $500,000 and $1,000,000

$1,500 if the gross receipts are between $1,000,000 and $3,000,000

$3,000 if the gross receipts are between $3,000,000 and $5,000,000

$4,500 if the gross receipts are between $5,000,000 and $10,000,000

$7,200 if the gross receipts are between $10,000,000 and $25,000,000

$18,000 if the gross receipts are between $25,000,000 and $50,000,000

$33,000 if the gross receipts exceed $50,000,000

Wholesalers and distributors of carbonated soft drinks

West Virginia

Excise tax on sales, handling, use, or distribution of bottled soft drinks and soft drink syrup in the state as follows:

$ 0.01 on each bottle of 16.9 ounces (1/2 liter) of bottled soft drink

$ 0.80 on each gallon of bottled soft drink syrup

$ 0 84 on each four liters of soft drink syrup

$ 0.01 on each ounce of dry mix used to make soft drinks

Manufacturers, distributors, wholesale dealers, retail dealers, or any other person who is the original consignee of any bottled soft drink or soft drink syrup

Source: Drenkard, Scott. "Overreaching on Obesity: Governments Consider New Taxes on Soda and Candy." Tax Foundation, October 2011; State tax department websites

TAXABILITY OF SOFT DRINKS AND CANDY ACROSS STATES

Of the 46 jurisdictions (45 states and the District of Columbia) that impose a state sales tax, 32 exempt grocery food purchases from the tax and 7 tax such purchases at a reduced rate. Many of these jurisdictions exclude candy or soft drinks from the definition of grocery food, thus making them taxable or subjecting them to the state's general sales tax rate. Table 2 indicates for each jurisdiction whether grocery food, candy, and soda are taxable.

Table 3 lists the jurisdictions that tax candy and soft drinks at a higher rate than grocery food. In all, 18 jurisdictions tax candy and 23 tax soft drinks at a higher rate than other groceries.

Table 2: Taxability of Groceries, Candy, and Soda Across Jurisdictions

T= Taxable, E= Exempt, RR = Reduced rate

Jurisdiction

State Sales Tax Rate

Grocery Food

Candy

Soda

Alabama

4%

T

T

T

Arizona

6.6%

E

E

E

Arkansas

6%

RR

RR

RR

California1

7.25%

E

E

T

Colorado

2.9%

E

T

T

Connecticut

6.35%

E

T

T

District of Columbia

6%

E

E

T

Florida

6%

E

T

T

Georgia

4%

E

E

E

Hawaii

4%

T

T

T

Idaho

6%

T

T

T

Illinois

6.25%

RR

T

T

Indiana

7%

E

T

T

Iowa

6%

E

T

T

Kansas

6.3%

T

T

T

Kentucky

6%

E

T

T

Louisiana

4%

E

E

E

Maine

5%

E

T

T

Maryland

6%

E

T

T

Massachusetts

6.25%

E

E

E

Michigan

6%

E

E

E

Minnesota

6.875%

E

T

T

Mississippi

7%

T

T

T

Missouri

4.225%

RR

RR

RR

Nebraska

5.5%

E

E

E

Nevada

6.85%.

E

E

E

New Jersey

7%

E

T

T

New Mexico

5.125%

E

E

E

New York

4%

E

T

T

North Carolina

4.75%

E1

T

T

North Dakota

5%

E

T

T

Ohio

5.5%

E

E

T

Oklahoma

4.5%

T

T

T

Pennsylvania

6%

E

E

T

Rhode Island

7%

E

T

T

Table 2: -Continued-

Jurisdiction

State Sales Tax Rate

Grocery Food

Candy

Soda

South Carolina

6%

E

E

E

South Dakota

4%

T

T

T

Tennessee

7%

RR

T

RR

Texas

6.25%

E

T

T

Utah1

5.95%

RR

RR

RR

Vermont

6%

E

E

E

Virginia1

5%

RR

RR

RR

Washington

6.5%

E

E

T

West Virginia

6%

RR

RR

T

Wisconsin

5%

E

T

T

Wyoming

4%

E

E

E

Source: CCH State Tax Guide, State tax department websites

1State rate includes mandatory, statewide, local add-on sales taxes: California (1%), Utah (1.25%), and Virginia (1%).

Table 3: States that Tax Candy and Soft Drinks at Higher Rates Than Groceries

Candy Taxed at Higher Rate

Soft Drinks Taxed at Higher Rate

Colorado

Connecticut

Florida

Illinois

Indiana

Iowa

Kentucky

Maine

Maryland

Minnesota

New Jersey

New York

North Carolina

North Dakota

Rhode Island

Tennessee

Texas

Wisconsin

California

Colorado

Connecticut

District of Columbia

Florida

Illinois

Indiana

Iowa

Kentucky

Maine

Maryland

Minnesota

New Jersey

New York

North Carolina

North Dakota

Ohio

Pennsylvania

Rhode Island

Texas

Washington

West Virginia

Wisconsin

RP:ts