The State of Colorado passed a bill eliminating the sales tax exemption on soft drinks and candy, effective May 1st , 2010.
Food for home consumption is exempt from state sales tax, but candy and soft drinks will no longer be considered “food” for tax purposes. The definitions of the varous categories in the bill are confusing. Let me explain:
Items purchased through a vending machine means the vendor/operator is responsible for remitting taxes to the corresponding state and city tax agencies. The state sales tax on candy and soft drinks will now cost vending operators almost 3 cents per dollar. (Or will it! Keep reading.) Some operators may decide to raise their prices, while others may choose to absorb the cost rather than risk a decline in sales.
The problem is…not everything offered in a typical vending machine is taxed.
According to the bill, soft drinks are sweetened non-alcoholic beverages, therefore: soda pop, iced teas, sports drinks, and energy drinks, will be taxed – but not juice, nor drinks that contain at least 50% juice, milk, or milk substitutes (like soy), nor unsweetened drinks such as seltzers.
The bill defines Candy as “a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruit, nuts, or other ingredients or flavoring in the form of bars, drops or pieces. Candy does not include any preparation containing flour and shall require no refrigeration.” (I added the bold format.)
That means it excludes cookies, muffins, or pastries, because they contain flour, and also ice-cream with candy, because it needs to be refrigerated. Candy Bars such as Kit Kats or Twix and licorice-type candy like Twizzlers should also be excluded because they also contain flour…
Needless to say….what has just been described is a business nightmare. My recommendation is to keep track of your supply purchases. Pay tax on your purchases not on your sales to ease the accounting burden.
For additional clarification the information is posted on the Colorado Department of Revenue website.
