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Are marshmallows candy? It’s a sticky question for state sales taxes

Matt Levin Nov 22, 2022
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Marshmallows — the roastable, toastable sweet — are taxed differently depending on a state's definition of candy. Charley Gallay/Getty Images for Best Events

Are marshmallows candy? It’s a sticky question for state sales taxes

Matt Levin Nov 22, 2022
Heard on:
Marshmallows — the roastable, toastable sweet — are taxed differently depending on a state's definition of candy. Charley Gallay/Getty Images for Best Events
HTML EMBED:
COPY

Inflation means you probably have some sticker shock from your Thanksgiving grocery run. I bet you can tell me off the top of your head how much you spent, but let me ask you this: How much did you pay in sales tax? 

Groceries are exempt from sales taxes in the majority of states, but not everything you buy in a grocery store is technically a grocery. That frozen turkey: no tax. That prepared pumpkin pie: probably taxed. The marshmallows for the candied yams — that comes down to a very fraught question in the American tax code: Are marshmallows candy? 

The marshmallow industry has two peak seasons. 

“Summertime for s’more season, or it’s going to be right now going into the holidays,” said Dan Reed, who heads marketing for Dandies Vegan Marshmallows. You can pick up a pack at Whole Foods for about $5. 

Well, about $5 if you’re in Michigan. If you’re in Indiana, that’s $5 plus a 7% sales tax, though you can get marshmallow creme in Indiana tax-free. 

“Some states can look at a marshmallow as a baking ingredient, whereas another state might look at it as a candy and tax it differently,” Reed said.

Most states don’t tax groceries, or at least have a reduced tax on them. The logic is that a tax on basic food items would be regressive, said Jared Walczak with the Tax Foundation. 

“Policymakers decided, ‘OK, if we’re going to provide this benefit for groceries, we care about it being core foods — maybe healthy things, and candy is not a necessity.'”

But ice cream can have more sugar than a candy bar, and in most states, ice cream gets the tax-free treatment. Plus, how do you define candy in the first place? 

“Well, New York is a great example of the weirdness of taxing candy,” said Renu Zaretsky with the Tax Policy Center. “If a marshmallow is covered in candy or chocolate, that is counted as candy, and you would pay a 4% sales tax.”

But if you just buy a pack of mini marshmallows to eat by the handful, the state of New York doesn’t see a dime. 

It might be easier to just tax food according to how bad it is for you, Zaretsky said — like a sin tax. (Although “We want s’mores to cost s’more” probably isn’t a winning political message.)

For his part, Dan Reed at Dandies Vegan Marshmallows says the different tax treatments in different states don’t seem to impact sales. 

“I think a lot of that has to do with how we, as shoppers, look at taxes,” he said. “It’s sort of an aggregated line item on the receipt.”

And these days, plenty of consumers would rather not look at the receipt at all. 

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