What does Missouri LR 8246 conclude about Taxability of Candy Sales?

Plain-English summary

The Missouri Department of Revenue ruled that a retailer's sales of in-house made fudge, in-house made chocolate, and various individual pieces of candy qualify for Missouri's reduced 1% sales tax rate on food, rather than the standard sales tax rate.

Applicant sells these candies "to go" -- they require no further preparation and are not served hot. Section 144.014, RSMo, taxes retail sales of food at a rate of 1%, but only defines "food" for that statute to mean products eligible as food under 7 U.S.C. Section 2012, the federal Supplemental Nutrition Assistance Program (SNAP, formerly the food stamp program). Under 7 CFR Section 271.2, "eligible foods" for SNAP purposes includes any food or food product for human consumption, except hot food products prepared for immediate consumption.

The USDA, which administers SNAP, has identified snack and dessert items -- specifically including chocolate, fudge, and candy of all kinds -- as SNAP-eligible foods, citing its own RPMD Policy Memorandum 2020-04 and the FNS-GD-2020-0134 "Accessory Foods List." Because Applicant's candies are supplemental, dessert foods that qualify as eligible food under SNAP, and because they are not sold hot or for immediate consumption, they fall within Section 144.014's reduced 1% food tax rate.

What this means for you

Candy and confectionery shop owners

If you sell bulk candy, in-house made fudge, or in-house made chocolate for takeout -- not hot, and without further preparation by you or the customer -- this ruling indicates those sales should be taxed at Missouri's reduced 1% food tax rate under Section 144.014, RSMo, rather than the standard sales tax rate. The key facts driving this result are that the candy is not served hot and requires no further preparation.

Bakery and dessert retailers more broadly

The reasoning here extends beyond candy: any dessert or snack item that the USDA has identified as SNAP-eligible, and that you sell cold or at room temperature without further preparation, may qualify for the same reduced food tax rate. If your dessert items are instead sold hot or heated for immediate consumption, this favorable treatment would not apply.

Accountants and tax professionals preparing Missouri sales tax filings

This ruling shows the Department's chain of reasoning for the reduced food tax rate: Section 144.014, RSMo, ties Missouri's definition of "food" to federal SNAP eligibility under 7 U.S.C. Section 2012, which in turn depends on 7 CFR Section 271.2's exclusion of hot food prepared for immediate consumption. Confirm both that a client's item is SNAP-eligible (per USDA guidance) and that it is not sold hot or for immediate consumption before applying the 1% rate.

Common questions

Q: Does the reduced 1% rate apply to all candy sold in Missouri?
A: This ruling addresses bulk candy, in-house made fudge, and individual in-house made chocolate that are not served hot and require no further preparation. The Department's reasoning turns on SNAP eligibility and the item not being a hot food prepared for immediate consumption, so candy sold under those same conditions would be expected to receive the same treatment.

Q: Why does a federal food-stamp program (SNAP) matter for Missouri sales tax?
A: Section 144.014, RSMo, defines "food" for purposes of the reduced 1% tax rate by reference to what is eligible food under 7 U.S.C. Section 2012, the federal SNAP statute. Missouri's tax rate for food therefore depends on whether the USDA treats the item as SNAP-eligible.

Q: What would disqualify candy or fudge from the reduced rate?
A: Under 7 CFR Section 271.2, food that is hot and prepared for immediate consumption is not "eligible food" under SNAP, and so would not qualify for Section 144.014's reduced rate. Candy served hot, or requiring further preparation before consumption, would fall outside this ruling's reasoning.

Q: Can another candy retailer rely on this ruling?
A: Not automatically. A Missouri letter ruling binds the Department only as to the requesting Applicant, only for three years from its date, and only so long as the facts and law remain unchanged. Another retailer should confirm its facts match those described here and consult a tax professional before relying on this result.

Citations and references

Statutes and regulations:

• Section 144.014, RSMo (reduced 1% sales tax rate on retail sales of food)
• 7 U.S.C. Section 2012 (SNAP program definition of food)
• 7 CFR Section 271.2 (definition of "eligible foods" under SNAP)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8246

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated April 11, 2023.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is a business that sells various in-house made fudge, in-house made chocolate, and various other types of individual pieces of candy. The candy does not require further preparation and is not served hot.  These candies are served "to go".

ISSUE :

Are bulk candy, in-house made fudge, and individual in-house made chocolate sales taxed at the low food tax rate?

RESPONSE :

Yes. Bulk candy, in-house made fudge, and individual in-house made chocolate sales are taxed at a low food tax rate.

Section 144.014. RSMo, taxes retail sales of food at a rate of one percent. "Food" for this statute is defined to include only those products eligible as food under 7 U.S.C. Section 2012 (under what was formally called the food stamp program, but is now the "Supplemental Nutritional Assistance Program" or "SNAP Program").

7 CFR Section 271.2 defines "eligible foods" in relevant part to include any food or food product intended for human consumption except hot food products prepared for immediate consumption.

The SNAP Program is administered by the United States Department of Agriculture ("USDA").  The USDA has identified various types of eligible food items that qualify for SNAP Program benefits.  These items of eligible food includes snack and dessert food items such as chocolate, fudge, and candy of all kinds.  See U.S. Department of Agriculture, RPMD Policy Memorandum 2020-04, Retailer Eligibility- Clarification of Criterion A and Criterion B Requirements , (clarifying the difference between who can qualify as an eligible retailer under the SNAP Program and what are eligible foods that can be sold by an eligible retailer under the SNAP Program); see also U.S. Department of Agriculture, FNS-GD-2020-0134, Accessory Foods List (listing items that are eligible foods under the SNAP Program that are not staple foods for determining retailer eligibility).

In this instance, the various candies sold by the Applicant are supplemental, dessert foods eligible under the SNAP Program as determined by the USDA.  Therefore, those foods are also subject to the reduced tax rate found in Section 144.014, RSMo.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford