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Indiana Department of Revenue

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Trick or Treat, Sales Tax, and Candy

October 26, 2016

En Español

During the Halloween season as you are passing out candy, trick or treating, or simply buying candy at the store, there is something you should know! Many items commonly considered candy, including some candy bars, are not classified as “candy” for sales tax purposes.

Generally, the sale of food and food ingredients for human consumption is exempt from Indiana sales tax. Food is defined as substances sold for ingestion or chewing by humans that are consumed for their taste or nutritional value. The term does not include tobacco, alcoholic beverages, candy, dietary supplements, or soft drinks.

Candy is defined as preparations 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. Candy is subject to Indiana sales tax.

However, an item containing flour is not considered candy and is exempt from Indiana sales tax.

Many items commonly considered candy contain flour and are not subject to Indiana sales tax. These items include:

  • Kit-Kat Bars
  • Nestle Crunch Bars
  • Twix Bars

Gluten-free candy is taxable if it does not contain flour.

Also, items that are not bars, drops, or pieces also are exempt from Indiana sales tax. For example, Pixie Stix are not considered candy for sales tax purposes.

While some items commonly considered candies are not taxable, many candy items are taxable. Chewing gum is a taxable item because it is a preparation of sweetener and flavorings in a bar or piece form.

As you are buying candy this year, pay attention to the items which may or may not be taxable! For more information about sales tax on food in Indiana, please refer to Information Bulletin #29.

What does the Enforcement Division do?

October 19, 2016

Many people contribute to the success of an Indiana business – employees, supervisors, customers, etc. Like Indiana businesses, the Indiana Department of Revenue is made up of many different people who work together to serve Hoosier taxpayers. The Enforcement Division is one such group of people and has a key role in helping the department succeed.

The Enforcement Division performs and manages taxpayer audits. There are two kinds of audits: field audits and desk audits.

A field audit is when an auditor goes to a taxpayer’s business. If a taxpayer is selected for a field audit, an auditor provides a list of documentation needed to complete the audit. When the audit is completed, the taxpayer receives an audit report that details any adjustments or issues. If the taxpayer disagrees with any portion of the auditor’s assessment, he or she can protest the findings.

In contrast, desk audits require much less time and resources.  They usually are focused on a specific issue in a single tax year and often can be resolved by sending the department a few pages of documentation. As with field audits, the taxpayer receives an audit assessment and can protest any portion of the assessment.

Filing taxes can be complicated! We know most people want to file and pay their taxes correctly to avoid an audit. That’s why it’s our goal to educate taxpayers. Only a small percentage of Hoosier taxpayers are audited each year, and that’s largely because training and education are critical components of the auditing process.

During audits, the Enforcement Division helps taxpayers understand why an assessment is being made. As audits are performed, areas are identified that seem to be especially difficult or confusing to understand. When these areas are identified, the Enforcement Division works to prepare specialized training classes. Recently, the Enforcement Division created training for auctioneers, auto dealerships, convenience stores and new businesses through the Business Education Outreach Program.

According to the Small Business Administration, 49 percent of businesses fail in the first five years, possibly due to a failure to understand taxes. The Business Education Outreach Program helps businesses thrive through better taxpayer education earlier in the business formation process, and offers free tax presentations to Hoosier organizations and the public. To view a list of upcoming events, or to host an event, click here.

To learn more about the Enforcement Division and other divisions of the Indiana Department of Revenue, check out our 2016 Annual Report.

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