Proposed tax on candy is complicated

Rep. Jim Moeller wants to make this clear: He has nothing against candy.

In fact, he loves candy. Especially Almond Roca.

“It’s my favorite candy,” he says. “No one hates candy in this Legislature. We fuel ourselves on coffee and candy.”

But one of Moeller’s top priorities — adequate funding for the state’s public health departments — is languishing due to the state’s budget crisis.

So the Vancouver Democrat has stirred up a tempest by introducing a bill that would levy the state’s 6.5 percent sales tax on candy and gum sold in Washington. The tax is expected to raise $17 million in 2011 and $30 million annually thereafter, with all the revenue dedicated to funding public health programs.

A Jan. 22 hearing in Olympia on House Bill 2388 was packed with candy company executives, lobbyists for retailers, childhood obesity prevention advocates and public health officials.

Brown & Haley, the Tacoma company that makes Almond Roca, showed up with free samples for lawmakers. So did Seattle Chocolate Co., a high-end confectioner.

HB 2388, still awaiting action in the House Health Care and Wellness and House Finance committees, would remove candy and gum from the category of food, which is exempt from the state sales tax.

“I mean, when was the last time you turned on the TV and heard, ‘Skittles, it’s what’s for dinner’?” Moeller quipped at the January hearing, as reported by The Olympian.

One problem with the bill, opponents say, is the definition of “candy.”

In 2007, Washington signed on to a multi-state streamlined sales and use tax agreement that requires member states to use a common definition for “food and food ingredients.” Under that definition, if a product contains flour, it’s food.

The agreement allows states to exclude candy — as well as soft drinks, dietary supplements and prepared food — from the sales tax. Current Washington law specifically exempts “food and food ingredients,” including candy, from the tax.

Moeller’s bill would change that. And therein, candy companies say, lies the problem.

Under the uniform definition, “if a product does not contain flour, it’s candy,” said Mark Johnson, a lobbyist for the Washington Retail Association. “If it does, it’s a food item. The confusion for my members is, if someone buys a Snickers bar and a Twix bar, you’ve got an employee who has to remember, ‘Okay, I tax the Snickers but not the Twix.’ Go explain that to your customers.”

Alison Bodor, a Washington, D.C.-based lobbyist for the National Confectioners Association, attended the Olympia hearing on behalf of several Washington candy manufacturers.

“Washington is well-known for its confections,” Bodor said. “There are small businesses there that have been around for 80 or 90 years, that are really pillars of their community, that are all of a sudden being discriminated against. Why not tax all food at 1 percent?”

Yes, Bodor said, a sales tax on candy is discriminatory. “We believe it discriminates against candy by making it more expensive than other dessert items. A chocolate-covered pretzel would be exempt but a chocolate-covered strawberry would be taxed.”

Plus, candy wholesalers and retailers would have to figure out how to implement the tax on their own, she said.

Opponents of the tax also argue that it would cut into the demand for candy, hurt small businesses and cost jobs.

But some doubt that a 6.5 percent sales tax would curb Washington’s sweet tooth.

“Most retailers would possibly lower the price” to make up for the tax, said Pam Sadewasser, manager of Fern Prairie Market near Camas. “We would cut our margin a little bit.”

“We do quite a bit of business in candy, but I can’t be totally against it,” she said. “It would probably help with obesity and health problems. If the money is going to go to health care in the state, I’m all for that instead of just putting it on the ‘sins’” — tobacco and liquor.

Washington’s tobacco tax is already too high, she said.

John Wiesman, Clark County’s director of public health, says there’s a clear nexus between candy and public health issues including obesity, poor nutrition and dental cavities.

Under Moeller’s bill, revenue from the candy tax would guarantee each of the state’s 35 public health departments base funding of at least $100,000. Revenue left over would be distributed on a per capita basis.

The public health community’s top priority is restoration of funding for maternity support services and HIV prevention statewide, Wiesman said. Both would be all but eliminated under the all-cuts budget Gov. Chris Gregoire unveiled in December.

“We also support, if the Legislature supports it, a dedicated funding source” such as Moeller’s bill would provide, Wiesman said. “We believe it is the Legislature’s job to decide where the funding would come from.”

The Clark County Department of Public Health operates on an annual budget of $15.1 million. Since the beginning of 2008, the department has eliminated the equivalent of 75.5 public health professionals, about 45 percent of its staff.

Kathie Durbin: 360-735-4523 or kathie.durbin@columbian.com.