Once upon a midnight dreary, while I pondered, weak and weary: how much sales tax will I owe this Halloween? Whether you are stocking up on candy in anticipation of young ghouls and goblins visiting your homes, getting your costume ready for a night filled with chills and thrills, or spending your money to have other people scare you at a haunted house, you may owe sales tax on your purchases.
Those wanting to avoid a trick must make sure to stock up on plenty of candy treats. Food is mostly exempt from sales tax, but several states do not extend that exemption to candy. Drawing the line between the two can be difficult, and often is determined by whether the item contains flour. For example, Chief Justice John Roberts noted in his South Dakota v. Wayfair dissent that Illinois considers Twix to be food and Snickers to be candy because Twix has flour.
Whether or not you choose a flour-filled treat to hand out, you’ll also need to pick out the right costume. Several states do not impose sales tax on the sale of clothing. Minnesota exempts clothing from sales tax; however, that exemption does not extend to wigs, costume masks, patches, and emblems sold separately. A New Jersey Tax Bulletin noted that Halloween costumes (not containing fur) are covered by its general exemption for clothing, but Halloween masks are subject to tax. Pennsylvania exempts most clothing from sales tax, except items not for everyday wear, such as a Halloween costume.
If these clothing distinctions don’t give you enough of a fright, you might head down to a local haunted house. In North Carolina, a recently enacted statute specified that sales tax applies to admissions charges to be a spectator for an entertainment activity, but this does not apply to charges to participate. Examples of nontaxable admissions include riding in a carriage, chairlift, or an amusement ride. New York imposes sales tax on admissions charges to amusement places if the charge is more than $0.10, which would include haunted houses.
However you choose to celebrate, be on the lookout for sales tax surprises. Otherwise if someone comes tapping, tapping on your front door this Halloween, it just might be the taxman.
Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: How does your state tax Halloween items?
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