January 13, 2009
SALES TAX ON FOOD AND PERSONAL CARE ITEMS
By: Judith Lohman, Chief Analyst
You asked (1) which food and personal care items are subject to Connecticut sales tax and (2) for information on “junk food” taxes or tax proposals in New York and other states.
Connecticut generally imposes state sales tax on sales of candy, confectionery (candy and other food high in sugar, such as gum), and carbonated soft drinks (soda). Connecticut also taxes “meals,” which is food prepared or packaged for immediate consumption. Most individual, single-serving packages of snacks, such as chips, pretzels, or cookies, are considered meals and are therefore subject to sales tax.
Special exemptions apply to vending machine and honor box sales of meals and some candy, confectionery, and soda. When sold through a vending machine or unattended honor box (1) meals (including non-candy “snacks”) are not taxed regardless of price and (2) candy, confectionery, and soda is not taxed if sold for 50¢ or less. Vending machine meals have been effectively exempt since 1995 while candy and soda costing 50¢ or less were exempted in 2000. Honor box sales were exempted in 2007.
Personal care items, such as shampoo, soap, shaving cream, cosmetics, hair care products, and similar items, are subject to Connecticut's 6% sales tax unless they are sold by exempt organizations or in exempt facilities or by vending machine for less than 50¢.
There have been several proposals introduced in legislatures in other states to impose special taxes on junk food, soda, and other soft drinks. The most recent is New York Governor David Paterson's proposal to establish an 18% tax on soda and soft drinks containing less than 70% fruit juice. Proposals to increase taxes on candy, soda, or bottled water were also introduced in the Iowa, New Hampshire, and New York legislatures in 2007. None of these proposals has been enacted.
Although Connecticut's 6% sales tax applies to sales of all tangible personal property at retail, state law exempts “food products for human consumption” from the tax. But it excludes certain foods and beverages from the exemption, thereby making them taxable. The taxable food products are (1) liquor, wine, and beer; (2) soft drinks, sodas, or beverages ordinarily dispensed at, or in connection with, bars and soda fountains; and (3) candy and confectionery (CGS § 12-412 (13)). (Although subsection (13) also excludes nonprescription medicine and dietary supplements from the tax exemption for food products, these items are exempt from the sales tax under another subsection (CGS § 12-412 (48).)
Department of Revenue Services (DRS) regulations define taxable beverages as carbonated beverages (Regs. of Ct. State Agencies, § 12-426-29). Other types of sugared beverages are generally taxable only when sold in bottles or containers of 16 ounces or less because the smaller sizes count as “meals.”
In addition to the list of taxable foods, the law also applies the sales tax to “meals” sold by “eating establishments” or caterers. A “meal” is food sold in ready-to-eat form or wrapped as “take-out” or “to-go” to be eaten elsewhere. The term “meal” includes “snacks,” donuts, cookies, single slices of cake, or other items sold for immediate consumption.
An “eating establishment” includes a restaurant, cafeteria, grinder shop, pizzeria, drive-in, fast food outlet, ice cream truck, hot dog cart, refreshment stand, sandwich shop, private and social club, cocktail lounge, tavern, diner, snack bar, and hotel or boarding house that furnishes both lodging and meals to its guests (CGS § 12-412 (13)).
Some food and beverages that could be considered “junk food,” such as donuts, cookies, and chips, although not explicitly taxable under the statutory definition of food, are taxable as meals when bought under the right circumstances. DRS considers a “meal” to be any food item that is (1) sold by an eating establishment and (2) not sold in bulk. DRS's definition of a “bulk sale” can vary depending on the type of food. For example, a sale of five or fewer donuts, cookies, rolls or pastries is considered a meal and therefore taxable, while sale of more than five such items is a non-taxable bulk sale. Special rules apply to supermarkets.
DRS Policy Statement 2002 (2) (copy enclosed) explains in more detail when food is considered a taxable meal.
Vending Machine and “Honor Box” Sales
State law provides a sales tax exemption for certain items when they are sold through coin-operated vending machines or unattended honor boxes. These items are subject to sales tax when sold by other types of retailers. The vending machine exemption covers (1) meals and (2) items costing 50¢ or less. Since single-serving, ready-to-eat items, such as sandwiches, bags of pretzels, or cookie packages, are considered “meals,” this law means that such items are not taxed when sold through vending machines or honor boxes, regardless of the price. But candy, confectionery, and soda are neither meals nor food products, so they are taxable when sold through vending machines, unless they cost 50¢ or less (CGS § 12-412(27), as amended by § 121 of PA 07-4, June Special Session).
For example, according to DRS Policy Statement 2001 (5), the following items are not taxable when sold through vending machines or at honor boxes:
● Sandwiches and grinders (ready-to-eat, heatable or microwavable)
● Packages, canned, or dehydrated soups, entrees, meats, and vegetables
● Chips, pretzels, popcorn, nuts, trail mix, and similar snack food
● Granola and cereal bars
● Cookies, crackers, and donuts
● Fruit (canned, dried, or individual pieces)
● Puddings, cakes, pies, and ice cream
● Coffee, tea, and cocoa
● Fruit juice, mineral water, and all other noncarbonated, nonalcoholic beverages
● Any item costing 50¢ or less
On the other hand, the following items are taxable when sold through vending machines or honor boxes, but only if they cost more than 50¢:
● Candy and confectionery, including chocolate
● Candy-coated nuts, raisins, popcorn, cereal and granola bars
● Chewing gum
● Soda and all other carbonated beverages and alcoholic beverages
● Cigarettes and tobacco products
● Items not intended for human consumption
Personal Care Items
The 6% sales tax applies to shampoo, shaving cream, cosmetics, hair care products, toothpaste, and other personal care items sold in retail stores. But such products are not taxed if sold:
1. to federal, state, or local governments or one of their agencies (§ 12-412 (1));
2. to or by a nonprofit charitable hospital, nursing home, rest home, or residential care home (§ 12-412 (5));
3. to any charitable, religious, or similar organization exempt from federal income taxes (§ 12-412 (8));
4. for $20 or less by any Connecticut nonprofit organization or school for support of youth or student activities (§ 12-412 (26));
5. for 50¢ or less from a vending machine or unattended honor box (§ 12-412 (27));
6. to a center of service for elderly persons (§ 12-412 (35));
7. for $100 or less through a gift shop in a nursing home, rest home, residential care home, convalescent home, or adult day care center, if the profits from the sales are used for the benefit of the residents or people using the center (§ 12-412 (56));
8. by nonprofit organizations at bazaars, fairs, picnics, tag sales, or similar events held no more than five times per year (§ 12-412 (94)); or
9. by an historical society (§ 12-412 (98)).
“JUNK FOOD” TAXES AND PROPOSED TAXES IN OTHER STATES
There have been several proposals introduced in state legislatures to impose special taxes on junk food, soda, and other soft drinks. In this report, we list four recent proposals introduced in 2007 and 2008. We also attach an OLR Report from 2002 (2002-R-1004) that describes such taxes and tax proposals in other states as of the date of that report. None of the proposals listed below have been enacted.
Governor's Budget Proposal, 2008. As part of his budget proposal for FY 2009-10, Governor David Paterson seeks to establish a special 18% sales and use tax on (1) fruit drinks that contain less than 70% natural fruit juice and (2) non-dietetic soft drinks, soda, and beverages. Revenue from the proposed tax will be directed to state health initiatives.
Such beverages, along with candy and confectionery, are currently subject to New York sales tax. New York's state sales tax rate is 4%. Localities in New York may charge additional local sales taxes of up to 4.75% for a total rate of up to 8.75%.
Assembly Bill 6376, Introduced in 2007. The bill would have made the following changes:
● Increased the state sales tax by 0.25% on (1) all food items already subject to New York sales tax (candy, confectionery, fruit drinks with less than 70% natural fruit juice, soft drinks, and soda); (2) sale or rental of video and computer games; and (3) sales or rental of film and music videos, DVDs, and CDs.
● Imposed a 1% tax on (1) sale of food and drink not subject to New York sales tax and classified as sweets or snacks in the United States Department of Agriculture's National Nutrient Database and (2) sales of movie theater admissions.
● Increased the state corporation tax for companies that spend money for television advertising for the above products on shows primarily aimed at children under 18.
● All revenues from the tax increases would go into a special Childhood Obesity Prevention Program Fund.
House Bill 820, introduced in 2007, would have established a state tax on candy equal to 50¢ per pound. The proposed tax was similar to a state cigarette tax in that it would require wholesalers and retailers to be licensed by the state and to buy and affix state tax stamps to candy. New Hampshire has no state sales tax.
Senate Bill 3165, introduced in 2007, would have eliminated the state's sales tax exemption for bottled water. Iowa's sales tax rate is 5%.