Washington’s new sales tax on candy has created another payday for the state.
It also has caused good and plenty confusion.
That’s because some candies are taxed while other sweets are exempt, giving Clark County merchants a massive headache and leaving consumers bewildered.
For example, that Hershey’s Kiss? It’s taxable candy, for sure. But Twizzlers, Twix bars and Whoppers malted milk balls? Exempt, according to the new state law.
Just before the new law became effective June 1, retailers were issued a list of more than 8,600 taxable candies, which included all but about 150 tax-exempt items that are normally displayed on store candy aisles.
“It’s really complicated,” said Yong Kim, a South Korean-born convenience store owner and operator of a Mini Mart shop on Southeast Chkalov Drive in Vancouver.
Kim, who operates the store with his wife and a few part-time employees, said his candy sales representative has been helping him keep it all straight.
Since the 1970s, Washington has not charged sales tax on food, defined to include candy and gum. But the state’s $2.6 billion budget shortfall caused legislators in April to pass a sales tax on candy.
Sponsors of Initiative 1107, a campaign aimed at rolling back the state sales tax on candy and other items, expect to turn in a minimum of 241,000 signatures by Friday to force a ballot vote this fall.
The new tax rule downgraded candy from the food group, making it subject to Clark County’s 8.2 percent sales tax.
That means a $1 candy bar now costs about $1.08 under the new rules.
Candy classification
But what exactly is candy? Sweets that do not contain flour, according to a national streamlined-sales-tax group, which Washington participates in.
That creates tax-exempt status for items that most of us would categorize as candy.
For instance, Milky Way, Nestle Crunch and Kit Kat bars and licorice are all exempt. So are those gold foil-wrapped Ferrero Rochers, but not a Hershey’s milk-chocolate bar, a Butterfinger or a bag of semi-sweet chocolate chips.
“I’d say the biggest issue is, customers are confused,” said Chris Girard, president and chief executive officer of Plaid Pantry, a Portland-based convenience store chain with three stores in Clark County.
Others say Washington is not the first state to separate candy from baked goods for sales tax purposes, using the pivotal ingredient of flour. The language, drafted by the multistate Streamlined Sales Tax Governing Board, aims to makes sales-tax rules more uniform across the nation.
“At least 24 other states have this definition,” said Mike Gowrylow, a spokesman for the Washington State Department of Revenue.
Scott Peterson, executive director of the Nashville, Tenn.-based Streamlined Sales Tax group, said the definition has nothing to do with catering to the wheat-growing industry. His organization merely set out to define candy. It did so in 2002.
“Flour seemed to be the only things to distinguish a cookie from candy,” Peterson said.
System change
At Fred Meyer, more than 20 employees from the company’s systems, finance and IT departments worked long hours to set up Washington stores to automatically ring up the taxable candy.
“We feel pretty good that we’ve captured everything,” said Melinda Merrill, a spokeswoman for Portland-based Fred Meyer, which operates seven Clark County stores and is owned by Cincinnati-based Kroger Inc.
Girard said his Plaid Pantry staff spent four to five days entering 2,000 candy bar codes into the company’s point-of-sale system.
But the conversion continues to be much harder for mom-and-pop stores without sophisticated systems, said Don Rhoads, president and owner of The Convenience Group, which operates 12 stores in Vancouver.
“A lot of them don’t have a POS (point-of-sale) system,” which can cost anywhere from $15,000 to $20,000, Rhoads said.
“That’s a major capital investment for a small business,” he said.
Thus, small, independent business owners, like the Chkalov Mini Mart’s Yong Kim, say they are still struggling to charge the sales tax correctly. When in doubt, Kim said he rings up the tax. That’s OK, according to Gowrylow, state spokesman.
“You can’t fault the stores for collecting too much tax. It’s when they don’t collect it that it becomes a problem,” he said.
Gowrylow said the state plans to audit a select number of businesses to make sure they are in compliance with the new law. The revenue department also has posted information about the candy law to its website.
“Basically, it’s the obligation of business to understand and comply with the law,” he said.
Most candy retailers say they know what’s expected. They’re swallowing their sour grapes and moving on.
