Changes to Illinois Sales and Use Taxes

As of September 1st, 2009, Illinois merchants will see changes in the sales and use taxes associated with candy, personal grooming and hygiene products and soft drinks. 

What Once Was Food Now Isn’t

Candy and soft drinks, sold right there in the supermarket were once considered food (taxed at 1%). Not very good food, certainly not healthy for you in most cases, but food nonetheless. Not anymore. Items that fall within the designation of “Candy” as well as the expanded definition for “soft drinks” will be taxed at the higher general merchandise rate (6.25%). 

Candy. Illinois law defines “candy” as follows: 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. This would include items that range from gum and breath mints to chocolate bars and caramel popcorn. The exception to this rule would be for items that contain flour or require refrigeration, such as chocolate-covered cookies as well as plain, dried, fruits and nuts. Those items are still considered food. 

Soft Drinks. Think of soft drinks and Coke and Pepsi come to mind. OK, they are soft drinks, but so are sports and energy drinks, sweetened teas and flavored waters. By definition, a soft drink is any non-alcoholic beverage containing natural or artificial sweeteners. This is important since with soft drinks, not only the category was changed, the scope of the category was increased as well. This means that items that were not soft drinks before September 1st will become soft drinks at that point and so fall under the increased taxes. The exceptions to this rule include any beverage that contains milk or milk products, soy, rice or similar milk substitutes; also, unsweetened teas, unsweetened water and drinks containing over 50% (by volume) fruit or vegetable juice. Items like these will continue to be taxed as food. 

There is also an affect on the Chicago soft drink tax that merchants need to take into account. With the broadening of the definition on the state level, the definition on the local level was broadened as well, bringing more products under the tax, even though the rate itself will remain 3%. 

Making the Determination. The Illinois Department of Revenue has left it to the merchants to determine whether they have a food product or one of the new non-food general merchandise products on their hands. The Department suggests that merchants simply read the label to see if they can continue to report these items as food, which they can as long as it falls into one of the exceptions listed. 

It’s Not Considered Medicinal Anymore

Nevermind the trite-but-true advice about washing your hands to stay healthy, the State of Illinois sees nothing medicinal in grooming or hygiene products for people, unless they are sold as a prescription. Otherwise, body soaps and cleansers, shampoos, toothpaste and mouthwash, antiperspirants, deodorants, sun screens and blocks—regardless of their medicinal claims or content—are to be taxed as general merchandise. 

Get More Information

If you are in Illinois and you have questions, then visit tax.illinois.gov or call 800-732-8866. If you are outside Illinois, be aware that this year saw many changes to state tax codes across the nation. To make sure you are completely up-to-date, contact your state taxing authority and learn what changes may soon affect you and your business.