Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 220 - Exemptions Primarily of Benefit to Consumers › Rule 701-220.3 - Candy

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Definitions.
a.
Candy.
For the purposes of this rule, "candy" is 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. "Candy" shall not include any preparation containing flour
				and shall require no refrigeration. Any preparation to which flour has been
				added only for the purpose of excluding the candy's sales from tax and not for
				any legitimate purpose, culinary or otherwise, shall not be sold exempt from
				tax under this rule. This definition is intended to be used when a person is
				trying to determine if a product that is commonly thought of as "candy" is in
				fact "candy." For example, the definition would be applied in a situation where
				a person is trying to determine if a product is "candy" as opposed to a cookie.
				The definition is not intended to be applied to every type of food product
				sold. Many products, such as meat products, breakfast cereals, potato chips,
				and canned fruits and vegetables are not commonly thought of as "candy." The
				definition of "candy" is not applicable to products such as these since they
				are not commonly thought of as candy.
b.
Preparation.
Candy must
				be a "preparation" that contains certain ingredients, other than flour. A
				"preparation" is a product that is made by means of heating, coloring, molding,
				or otherwise processing any of the ingredients listed in the definition of
				"candy." For example, reducing maple syrup into pieces and adding coloring to
				make maple candy is a form of preparation.
c.
Bars, drops or pieces.
Candy must be sold in the form of bars, drops, or pieces.
(1) A "bar" is a product that is sold in the
				form of a square, oblong, or similar form. For example, if Company A sells
				one-pound square blocks of chocolate, the blocks of chocolate are
				"bars."
(2) A "drop" is a product
				that is sold in a round, oval, pear-shaped, or similar form. For example, if
				Company B sells chocolate chips in a bag, each individual chocolate chip
				contains all of the ingredients indicated on the label and the chocolate chips
				are "drops."
(3) A "piece" is a
				portion that has the same makeup as the product as a whole. Individual
				ingredients and loose mixtures of items that make up the product as a whole are
				not pieces.
EXCEPTION: If a loose mixture of different items that make up
				  the product as a whole are all individually considered candy and are sold as
				  one product, that product is also candy.
EXAMPLE 1: Company C sells jellybeans in a bag. Each
				  jellybean is made up of the ingredients indicated on the label. Each jellybean
				  is a "piece" or "drop."
EXAMPLE 2: Company D sells trail mix in a bag. The product
				  being sold (trail mix) is made up of a mixture of carob chips, peanuts,
				  raisins, and sunflower seeds. The individual items that make up the trail mix
				  are not "pieces," but instead are the ingredients, which, when combined, make
				  up the trail mix. Therefore, the trail mix is not sold in the form of bars,
				  drops, or pieces.
EXAMPLE 3: Company E sells a product called "candy lovers
				  mix." Candy lovers mix is a product that is made up of a loose mixture of
				  jellybeans, toffee, and caramels. Individually, the jellybeans, toffee, and
				  caramels are all candy. The sale of the mixture is the sale of candy since all
				  of the individual items that make up the product are individually considered to
				  be candy.
EXAMPLE 4: Company F sells cotton candy that is packaged and
				  sold in grocery stores. Cotton candy contains sugar, corn syrup, water,
				  coloring, and flavoring; it does not contain flour. Cotton candy is not "candy"
				  because it is not sold in the form of a bar, drop, or piece. Cotton candy is,
				  however, "prepared food" under Iowa Code section
				  423.3(57)
"f."
d.
Flour.
In order for a
				product to be treated as containing "flour," the product label must
				specifically list the word "flour" as one of the ingredients. There is no
				requirement that the "flour" be grain-based, and it does not matter what the
				flour is made from. Many products that are commonly thought of as "candy"
				contain flour, as indicated on the ingredient label and therefore are
				specifically excluded from the definition of "candy." Ingredient labels must be
				examined to determine which products contain flour and which products do not
				contain flour. Any preparation to which flour has been added only for the
				purpose of excluding its sales from tax and not for any legitimate purpose,
				culinary or otherwise, shall not be sold exempt from tax under this rule. For
				example, a candy bar that contains flour, for a legitimate purpose, is excluded
				from the definition of "candy."
EXAMPLE 1: The ingredient list for a breakfast bar lists
				  "flour" as one of the ingredients. This breakfast bar is not "candy" since it
				  contains flour.
EXAMPLE 2: The ingredient list for a breakfast bar lists
				  "peanut flour" as one of the ingredients. This breakfast bar is not "candy"
				  because it contains flour.
EXAMPLE 3: The ingredient list for a breakfast bar that
				  otherwise meets the definition of "candy" lists "whole grain" as one of the
				  ingredients, but does not specifically list "flour" as one of the ingredients.
				  This breakfast bar is "candy" because the word "flour" is not included in the
				  ingredient list.
EXAMPLE 4: Company E sells a box of chocolates that are not
				  individually wrapped. The ingredient list on the label for the box of
				  chocolates identifies flour as one of the ingredients. The box of chocolates is
				  not "candy" since flour is identified as one of the ingredients on the
				  label.
EXAMPLE 5: Company F sells a box of chocolates that are not
				  individually wrapped. The ingredient list on the label for the box of
				  chocolates, which otherwise meets the definition of "candy," does not identify
				  flour as one of the ingredients. The box of chocolates is "candy."
EXAMPLE 6: Company G sells high-end licorice-licorice A and
				  licorice B. Licorice A would otherwise be "candy," but its wrapper lists
				  "flour" as an ingredient. Licorice A is not "candy." Licorice B is the same as
				  licorice A, except it does not contain "flour." Licorice B is
				  "candy."
e.
Other
				ingredients or flavorings.
"Other ingredients or flavorings" as used
				in this rule means other ingredients or flavorings that are similar to
				chocolate, fruits or nuts. This phrase includes candy coatings such as carob,
				vanilla and yogurt; flavorings or extracts such as vanilla, maple, mint, and
				almond; and seeds and other items similar to the classes of ingredients or
				flavorings. This phrase does not include meats, spices, seasonings such as
				barbeque or cheddar flavor, or herbs that are not similar to the classes of
				ingredients or flavorings associated with chocolate, fruits, or nuts, unless
				the product otherwise meets the definition of "candy."
EXAMPLE 1: Retailer A sells barbeque-flavored peanuts. The
				  ingredient label for the barbeque- flavored peanuts indicates that the product
				  contains peanuts, sugar and various other ingredients, including barbeque
				  flavoring. Since the barbeque-flavored peanuts contain a combination of
				  sweeteners and nuts, and flour is not listed on the label and the nuts do not
				  require refrigeration, barbeque-flavored peanuts are "candy."
EXAMPLE 2: Retailer B sells barbeque potato chips. Potato
				  chips are potatoes, a vegetable, and are not commonly thought of as candy. The
				  barbeque potato chips are "food and food ingredients" and not "candy." The fact
				  that the ingredient label for the barbeque potato chips indicates that the
				  product contains barbeque seasoning that contains a sweetener does not change
				  the fact that the barbeque potato chips are not commonly thought of as
				  candy.
f.
Sweeteners.
The term "natural or artificial sweeteners" as
				used in this rule means an ingredient of a food product that adds a sugary
				sweetness to the taste of the food product and includes, but is not limited to,
				corn syrup, dextrose, invert sugar, sucrose, fructose, sucralose, saccharin,
				aspartame, stevia, fruit juice concentrates, molasses, evaporated cane juice,
				rice syrup, barley malt, honey, maltitol, agave, and artificial
				sweeteners.
g.
Refrigeration.
A product that otherwise meets the definition
				of "candy" is not "candy" if it requires refrigeration. A product "requires
				refrigeration" if it must be refrigerated at the time of sale or after being
				opened. In order for a product to be treated as requiring refrigeration, the
				product label must indicate that refrigeration is required. If the label on a
				product that contains multiple servings indicates that it "requires
				refrigeration," smaller size packages of the same product are also considered
				to "require refrigeration." A product that otherwise meets the definition of
				"candy" is "candy" if the product is not required to be refrigerated, but is
				sold refrigerated for the convenience or preference of the customer, retailer,
				or manufacturer.
EXAMPLE 1: Company A sells sweetened fruit snacks in a bag
				  that contains multiple servings. The label on the bag indicates that after
				  opening, the sweetened fruit snacks must be refrigerated. The sweetened fruit
				  snacks "require refrigeration."
EXAMPLE 2: Company A sells sweetened fruit snacks in
				  single-serving containers. Other than for packaging, the sweetened fruit snacks
				  are identical to the sweetened fruit snacks in Example 1 above. However, since
				  this container of sweetened fruit snacks only contains one serving, it is
				  presumed that it will be used immediately, and the label does not indicate that
				  after opening, the product must be refrigerated. Even though the label does not
				  contain the statement that after opening the sweetened fruit snacks must be
				  refrigerated, these sweetened fruit snacks are considered to "require
				  refrigeration."
EXAMPLE 3: Company A sells chocolate truffles. The label on
				  the truffles indicates to keep the product cool and dry, but does not indicate
				  that the product must be refrigerated. Since the chocolate truffles are not
				  required to be refrigerated, even though the label indicates to keep them cool,
				  the chocolate truffles do not "require refrigeration."