As of January 1, 2018, candy and soft drinks are subject to the full rate of sales tax in Arkansas. The Arkansas Legislature previously had included these items in the definition of “food” and “food ingredients” to have candy and soft drinks be subject to a reduced rate of sales tax.
Candy is defined as 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.” However, the Legislature has specifically excluded from the definition of candy any “preparation containing flour and shall require no refrigeration.” Soft drink is statutorily defined to mean a “nonalcoholic beverage that contains natural or artificial sweeteners.” Soft drinks do not include beverages containing “milk or milk products, soy, rice, or similar milk substitutes, or that is greater than fifty percent (50%) of vegetable or fruit juice by volume.”
The Department of Finance and Administration (“Department”) has provided examples of what does and does not constitute candy or soft drinks.
Examples of candy, subject to the full sales tax rate, include Fruit Roll-Ups, Milky Way Midnight Bar, and Snickers. There are items that should not be included in the definition of candy because the ingredients contain some type of flour. Some of these items subject to the lower tax rate are Twix, Kit Kats, and Nestle Crunch. These items will be taxed at the full rate if the item is considered prepared food.
Examples of soft drinks that are taxable at the full rate of sales tax are Pedialyte, Gatorade, and Coca-Cola. Items that are taxed at the lower rate would be apple cider, milk, or water with no sweeteners.
What does this change in the law mean for you if you are a retailer? Retailers will need to collect the full sales tax rate on candy and soft drinks. If the retailer does not, the retailer risks paying the increased sales tax out of the retailer’s bottom line. This result could be incredibly burdensome for retailers with low profit margins. It could even put you out of business.
A copy of the Department’s notice on candy and soft drinks can be found here.
About the Author: Gerald “Jerry” Donnini II is a partner of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of Florida and Federal tax matters, with a heavy emphasis on the tobacco, convenience store and petroleum industries. He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Use Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.
ADDITIONAL ARTICLES TO READ
OHIO OFFERS TAX AMNESTY, published December 21, 2017, by Jerry Donnini, Esq.
PENNSYLVANIA FURTHER REGULATES BUSINESSES…OUTSIDE OF PENNSYLVANIA, published December 4, 2017, by Jerry Donnini, Esq.
ANOTHER TAX AMNESTY FOR AMAZON FBA SELLERS IN THE WORKS?, published November 26, 2017, by Jerry Donnini, Esq.
THE VOLUNTARY DISCLOSURE PROGRAM, published October 11, 2017, by Jerry Donnini, Esq.
STATES OFFER AMNESTY FOR FBA AMAZON PRORGAM, published August 13, 2017, by Jerry Donnini, Esq.
Tennessee Jumps on Economic Nexus Train, published March 13, 2017, by Jerry Donnini, Esq.