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1 Katherine Loughead, Sales Taxes on Soda, Candy, and Other Groceries, 2018 1 (2018)

handle is hein.taxfoundation/sltxsdyg0001 and id is 1 raw text is: FISCAL FACT No. 598 July 2018 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) nonprofit organization. @2018 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 Sales Taxes on Soda, Candy, and Other Groceries, 2018 Katherine Loughead PolicyAnalyst Key Findings: * Most states that levy a general sales tax offer an exemption for groceries, thereby removing qualifying grocery products from their sales tax base. However, many states claw back their grocery exemption for certain categories of goods, such as candy and soda. * As evidenced by arbitrary variations in the tax treatment of groceries, candy, and soda, selective application of sales taxes increases tax complexity while producing distortive effects. For example, most states apply the sales tax to Milky Way Midnight® bars but do not tax the sale of regular Milky Way® bars, which meet the definition of a grocery. * The Streamlined Sales and Use Tax Agreement (SSUTA) was established to promote a basic level of uniformity among state sales tax practices, but even with nearly half the states abiding by SSUTA definitions, varying sales tax rates on different types of groceries make sales tax administration unnecessarily complex. * Broad-based consumption taxes have the potential to be a relatively simple, transparent, neutral, and stable form of taxation, but differential tax treatment of groceries erodes the efficiency and effectiveness of state sales tax systems. * While grocery sales tax exemptions are well-intended, in practice they are limited in their ability to help low-income consumers. * For states that wish to offer a robust grocery-specific safety net, a well- administered grocery credit system may offer a simpler and more reasonable alternative to the status quo. * For states and consumers alike, there are many benefits to sales tax systems that tax all final consumer products - including groceries - at a low, flat rate. 202.464.6200 taxfoundation.org