Sales, Use and International Tax Activity Update - August 2009

Illinois - The Candy was Dandy – The High Cost of Hygiene – Carbonated Conundrum

On September 1, 2009 there will be changes to the Illinois sales tax laws concerning "Grooming and Hygiene Products", "Soft Drinks", and "Candy". “Grooming and hygiene” products were previously at the low rate if they claimed medicinal or healing qualities.  They are all now taxable at the high rate unless they are by prescription. Currently "Soft Drinks" are taxed at the non-food high rate. However, be aware of the new soft drink definition as it may change the taxability of the certain beverages. "Candy" is currently taxed at the low rate of 1%, but will be changing to the higher rate on September 1, 2009.

The following are specific guidance for the changes:

Candy

Candy has a broad definition. For Illinois taxing purposes, candy is 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.

How do I make the determination? You must check the ingredients label or package. If an item contains flour or requires refrigeration, it remains taxed as food (low rate). If an item contains sugar, it is taxed as general merchandise (high rate).

Grooming/hygiene products

Grooming and personal hygiene products for humans are taxed as general merchandise (high rate) whether or not they make a medicinal claim, unless sold as a result of a prescription.

Soft Drinks

The definition of "soft drink" has changed. "Soft drink" is any non-alcoholic beverage containing natural or artificial sweeteners.

Exception: "Soft drink" does not include any beverage containing milk or milk products, soy, rice or similar milk substitutes, unsweetened teas, drinks with greater than 50 percent of vegetable or fruit juice by volume, and carbonated or un-carbonated water that contains no natural or artificial sweeteners.

The full Informational Bulletin can be viewed on the Illinois Department of Revenue Website.

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