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Colorado Dishes Up Advice on Taxability of Holiday Items

  • Oct 22, 2013 | Gail Cole

 Taxable tangible goods, in Colorado and elsewhere.

It starts with Halloween--a sugar-fueled boost full of cobwebs, witches hats, and candy, candy, candy! Come November, the giant spiders and jack-o-lanterns are replaced by cornucopias and turkeys, which in turn are replaced by wreaths and elves and millions of sparkling lights. Not until the New Year arrives does the holiday season give it a rest.

For lots of people, the holidays are a joyous time. Yet along with the food and decorations, the holidays bring with them a host of not-so-festive tax questions: How are pumpkins taxed when they’re purchased to carve rather than to eat? Does sales tax apply to costumes and fake cobwebs? Why are bags of candy subject to sales tax when bags of apples purchased to cover in candy are not?

Inquiring taxpayers want to know.

To help guide taxpayers into the season of food and lights, the Department of Revenue has written a little blog on the Taxability of Holiday Items. It reminds that candy is subject to sales tax whether it’s purchased to bring into the office or to dole out to costume-clad children. It also explains that since costumes and decorations and holiday lights are “tangible,” they are “taxable.”

As for the feasts that will fill tables with cranberries, green beans and pies, the department suggests taxpayers read their bulletin on Taxable and Tax Exempt Sales of Food and Related Items. Here we learn that food purchased for human consumption at home is exempt from the state sales tax, as is food purchased with food stamps or WIC vouchers. On the other hand, all food and drink sold in restaurants, snack shops, and food carts are subject to state sales tax. So if you hate to cook and are planning to head to your local Chinese restaurant this Christmas, that meal will be taxed.

Some foods are exempt when purchased with WIC vouchers and food stamps but otherwise taxable. These include:

  • Candy;
  • Carbonated water in containers;
  • Chewing gum;
  • Cold sandwiches;
  • Deli trays;
  • Salad bar items (and prepared salads);
  • Seeds and plants to produce food for humans; and
  • Soft drinks.

Keep in mind this puzzling twist: if you buy your candy with food stamps, it’s exempt; if you buy it with cash, it isn’t exempt; unless you buy it from a vending machine, when it is exempt. Capisce?

If you’re not eligible for food stamps or WIC but don’t want to pay sales tax on Halloween candy, your best bet is to stock up on quarters.

The great pumpkin dilemma

The Colorado bulletin does not specifically address pumpkins, but states tend to make a distinction between pumpkins purchased to eat and pumpkins purchased to set on your porch or carve. If you plan to eat it at home, it’s exempt from sales tax. If you plan to use it as a decoration, it’s a tangible good and therefore taxable. The fact that many of us roast and eat the seeds we laboriously dredge out of the pumpkins we carve doesn’t give us a tax break. Life is unfair like that sometimes.

Warning: selling the extra pumpkins you grew? It’s worth checking with the Department of Revenue to learn whether or not you need to collect sales tax. In 2010, an Idaho tax collector threatened to shut down a 6 year old boy’s pumpkin patch for tax evasion. True story.

Local and special district taxes

Local jurisdictions in Colorado may decide whether or not to impose local and special district taxes on sales of food; however, “if they exempt food from sales tax they must use the same criteria as the state in determining which items are taxable and which are exempt.” And localities may not impose sales tax on food stamp- and WIC- purchased food.

States tend to see a boost in sales tax revenue during the holidays. 2012 Halloween sales were expected to reach $8 billion before Hurricane Sandy stole the show. No wonder the holiday season is such a festive time of year.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.