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Streamlined Sales Tax

State of Rhode Island
Division of Taxation
One Capitol Hill
Providence, RI 02908

IMPORTANT NOTICE FOR RETAILERS OF FOOD CANDY, SOFT DRINKS AND DIETARY SUPPLEMENTS

STREAMLINED SALES TAX
Effective January 1, 2007

The new law imposes sales tax on “candy”, “soft drinks”, “dietary supplements” and “prepared foods”. This may result in a difference in the tax treatment of some items when compared to prior law. “Food and food ingredients” remain exempt from sales tax.


Food and Food Ingredients

Under the amended version of R.I.G.L. 44-18-30(9), the sale of food and food ingredients purchased for human consumption are exempt from sales tax. “Food and food ingredients” are defined as substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. This term does not include candy, soft drinks, dietary supplements, alcoholic beverages, tobacco, food sold through vending machines or prepared food.

Under the Streamlined legislation the following products (previously exempt) are now subject to sales and use tax:

Seeds and plants that ordinarily produce food for human consumption

Fertilizers (including limestone)

Insecticides and fungicides, seed inoculants and plant hormones

These items are exempt if sold to farmers that hold a valid exemption number with the State of RI.

The following items are not included in the exemption for food and food ingredients.


Candy

The exemption for food under R.I.G.L. 44-18-30(a) does not apply to “candy.” “Candy” is defined as any “preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the forms of bars, drops, or pieces.” The term “candy” does not include any preparation containing flour as an ingredient.

Because many products commonly categorized as candy contain flour, packaging labels must be examined to determine which items are deemed taxable candy or exempt food products. Examples of items exempt after January 1, 2007 include KitKats, Twix, some licorice, Nestle Crunch, and Milky Way.

The term “candy” does not include any preparation that requires refrigeration. If an item that would otherwise be included in the definition of “candy” above requires refrigeration under health regulations, it would be deemed an exempt food product.

Candy that does not require refrigeration is taxable even if sold as such. For example, a number of candy bars that are regularly marketed at room temperature in the candy aisle may also be found in the refrigerated section of a convenience store. These products are refrigerated for customer preference rather than as directed on the label. Therefore, these items are not exempt from sales tax.

Soft drinks

“Soft drinks” are subject to sales tax. Soft drinks are defined as nonalcoholic beverages that contain natural or artificial sweeteners. The term does not include beverages that contain milk or milk products (including soy, rice, or similar milk products) or greater than 50 percent vegetable or fruit juice by volume. Again, product labels must be examined.

Frozen, or powdered soft drink mixes are not deemed to fall within the definition of “soft drink”, which must be in liquid form, and are therefore exempt as foods. This new definition may change the taxability of specific products, particularly in the area of non-carbonated beverages, which were all exempt under prior law.

Examples of taxable soft drinks:

  • Naturally and artificially sweetened water
  • Teas containing sweeteners
  • Drinks labeled as containing 50 percent or less fruit or vegetable juice
  • Sports drinks (Gatorade, PowerAde, etc.)
  • Sodas (colas, root beer, artificially sweetened diet colas, ginger ales, etc.)

Examples of items that are deemed exempt food products, rather than taxable soft drinks:

  • Unsweetened Water (regardless of carbonation)
  • Fruit or vegetable juices that contain more than 50 percent juice by volume
  • Nutritional drinks that contain soy (Ensure, Boost, etc.)
  • Apple cider
  • Beverage powders (Kool-aid, lemonade, sweetened iced tea)
  • Frozen fruit juice concentrates (regardless of percentage of juice, product is not in beverage form)

Dietary Supplement

“Dietary supplement” means any product intended to supplement the diet required to be labeled as a dietary supplement, identifiable by the “Supplemental Facts” box found on the label and as required pursuant to Federal law.