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TAXING YUMMY GOODNESS

April 19, 2004

The Iowa Department of Revenue has to make many tough calls, but none can be tougher than determining whether a Rice Krispy Bar is "candy." It matters; "candy" is subject to sales tax, where "cereal products" are exempt.

In a recent policy letter, the Department made the tough calls:

Issue:

   Chocolate Drizzle Rice Krispies Treats:  
   This snack consists of crispy rice and  
   marshmallow squares that are drizzled 
   with chocolate.     

Ruling:

   
   Exempt as a cereal product pursuant 
   to department rule 701 IAC 20.1(1)”e”.
   The fact that it is drizzled with 
   chocolate is not sufficient to constitute 
   a taxable candy-coated item.      

But not all news is good news.

Issue:

   
   Fruit Roll-ups Strawberry Sensation, 
   Fruit Gushers Watermelon Blast, Fruit
   Leather, and Scooby Doo Fruit Snacks:       

Ruling:

  These items all contain sugar as their 
  largest ingredient and are all classified 
  as taxable candy.        

Perhaps this work should be farmed out to a panel of experts.

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