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VOL. 123 | NO. 30 | Wednesday, February 13, 2008

A Break for Your Sweet Tooth: A Plan to Cut Sales Tax on Candy

By ERIK SCHELZIG | Associated Press Writer

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NASHVILLE (AP) - Here's a sweet deal: taxing candy at the same reduced rate as groceries like vegetables and milk.

State Sen. Bo Watson, a Hixson Republican, is sponsoring the measure to tax candy at the 5.5 percent rate levied on most other groceries.

Sweets are currently taxed at the 7 percent sales tax rate along with prepared foods, alcohol, dietary supplements and tobacco.

"I'm not sure that candy isn't food," Watson said Tuesday. "In fact, I think candy is food."

A Senate subcommittee advanced Watson's proposal to the full Finance Committee without a recommendation about whether it should be adopted.

But Senate Finance Chairman Randy McNally, R-Oak Ridge, was skeptical about whether the proposed tax reduction for candy should become law - especially in a tight budget year.

"And if you look at it from a health basis, you would probably want to tax it higher," he said.

Watson said the current law is confusing for consumers and retailers because candies made with flour are charged the lower tax rate, while those made without flour are charged the full 7 percent.

"Consumers don't make the distinction between a Twix bar being food and a Snickers bar being candy," Watson said.

Several companies produce candy and snacks in or near Watson's district, including the makers of Little Debbie snacks, Brachs candy and M&M's and Milky Way bars.

The Legislature's Fiscal Review analysts estimate Tennesseans will buy about $438 million worth of candy products in the upcoming budget year.

The analysts expect little change in consumption patterns if the tax rate is changed, but they project that the plan would cost the state $6.7 million in lost revenue.

Watson disputes the projected costs.

"That money is going to flow back into the economy in other ways, because people are going to spend it anyway," he said.

Rep. Mark Maddox, D-Dresden, and the sponsor of the companion bill in the House, acknowledged that the measure has little chance of passing this year. But he called the proposal a matter of simplifying taxes.

"Trust me, when my 8-year-old goes in and wants a candy bar, it won't make any difference what it's taxed," he said. "It's not going to make it any easier or harder, it's just going to make it less confusing."

Read SB2783 on the Legislature's Web site at http://www.legislature.state.tn.us

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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