Less than 11 days before a new Illinois "Junk Food" tax becomes effective, retailers across the State are struggling to implement the widespread and erratic changes imposed by the legislation. The tax changes effectively raise currently low sales tax on certain Candy and Soft Drinks within the state to the General merchandise rate of 6.25%. The increase was passed as part of the budget negotiations and will help fund the States multi-billion dollar capital projects fund. However, the State's definition of foods that fall under the Candy and Soft Drink labels have left all retailers and most consumers scratching their heads and seeking further guidance.
So why exactly are retailers confused? Well...first let's see we can answer a few questions correctly:
Would you consider a Kit Kat to be candy or food?
Is a package of Twizzlers candy or food?
Is Yogurt covered fruit candy or food?
Would you consider Iced Tea to be a soft drink?
Would you considered 0 calorie, 0 sugar flavored water to be a soft drink?
Chances are you provided the same answers to these questions as 99% of the general public would. However, the State of Illinois doesn't necessarily agree with common sense in adopting guidelines that re-define what is or is not candy or a soft drink.
Under the guidelines the State would consider any sugar based product not requiring refrigeration nor containing flour as candy. As a result, Kit Kat bars, containing flour, are no longer considered Candy and not subject to the increased tax. Likewise, Twizzlers and other licorice items, all of are produced with flour, would no longer be considered candy nor taxed as such. While yogurt (requiring refrigeration) would still be considered a food product, yogurt covered fruit is now considered candy and subject to the higher tax. Amusingly, yogurt covered pretzels would still be considered food.
The confusion only deepens as you consider that a Hershey's bar would be considered Candy, while the Cookies and Cream bar (containing flour) next to it on the shelf would be considered a food item. If you love caramel popcorn, be prepared to pay more for it; but, if your cheese flavored or regular popcorn will remain at the same price.
The erratic definitions only continue as retailers attempt to determine what is and is not a soft drink under the new law. While a vast majority would consider the term soft drink to refer to soda or certain juices, the state defines a soft drink as any non-alcoholic drink that contains natural or artificially flavors and or sweeteners. As a result, if you purchased a bottle of iced tea it would not be considered a soft drink, but if your tea is sweetened then you will now pay the additional tax. In addition, a bottle of flavored water that has 0 calories, 0 sugars, nor any other nutritional value is now subject to the more than 5% increase. However, a juice drink that contains more than 50% "real" fruit juice and may be loaded with sugar is not subject to the tax. If you should purchase a package of pre-mixed Kool-Aid it is considered a soft drink. However, if you should buy a package of Kool-Aid mix and add the water at home, you are no longer subject to the additional tax.
Are you confused yet?
The list of inconsistencies only deepens as retailers comb the list of ingredients on products throughout the stores in an attempt to collect the proper tax. Unfortunately, many more retailers out of frustration and demands on time are likely to apply the tax across the board, resulting in consumers paying millions in taxes on items that do not fall under the State's junk food definitions. Large chains such as Wal-mart, with teams of researchers, legal staff and nearly unlimited resources find the changes to the law as a mere nuisance. However, small "mom & pop" retailers, convenience stores and gas stations are having to commit endless hours to the task of combing the shelves, reading ingredients, reprogramming computer systems and consulting with their accountants in order to comply with the tax laws that provide little specific guidance.
The reality is that Illinois is just following the precedent set by other states by which they determine which consumer goods should be treated unequally. After first targeting tobacco and alcohol products with higher taxation they are now working there way down the food chain to candy and soft drinks. It may only be a matter of time before processed meats and other non-organic foods are subject to higher taxes. When this tax takes affect on September 1st, it will represent one of more than 450 individual tax and fee hikes that have been levied against Illinois consumers and businesses since the beginning of 2003.
Comments