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What gets taxed in Indiana — and what doesn't — might surprise you

Shari Rudavsky
IndyStar

The effort  started as a bill in the Indiana General Assembly to relieve people who buy and sell gold bullion and other metal coins from having to pay sales tax. Then Rep. Christina Hale, D-Indianapolis, tried to take the bill in a different direction: Proposing amendments to also remove tax from the sales of feminine hygiene products and diapers.

Both amendments failed, though they raised some questions about the state’s tax priorities. Indiana has a history of unpredictable, if you will, rulings on what to tax and what not to tax.

A 2012 bulletin from the Indiana Department of Revenue on the sales of food and tax aims to clarify matters for the public in one easy-to-consult list. The document draws on state statutes and court decisions in an effort “to tie everything together for those who are trying to understand the law,” said Amanda Stanley, director of public relations for the department.

Here are some things that do get taxed while other similar products do not:

Yes, candy; Kit Kat and Twix bars, no. So you might think that Kit Kat and Twix bars are candy. Not according to Indiana. The state’s definition of candy states that it does not include any product that contains flour, Stanley explains. Because flour is the third ingredient in Twix and the second in Kit Kats, these sweet treats come out without sales tax. Nestle Crunch, which contains crisped rice, is also non-taxable.

And Pixy Stix? Seems like you couldn’t get much more empty calories than these striped memories of childhood. But they, too, come without sales tax. Indiana considers food that comes in the form of bars, drops or pieces to be candy. “Pixy Stix are not bars, drops or pieces,” Stanley said. “The way that the state has defined candy is very specific. It’s not this general understanding of what we all call candy.”

Marshmallows, yes; Marshmallow crème, no. Again, it gets back to how Indiana defines candy. Marshmallows are sold in pieces. Marshmallow crème is not. So, the first food is considered taxable and the second not. “You really have to look at each item individually to consider whether or not it meets the requirements,” Stanley said.

Chips and pretzels, maybe — depending on where you buy them. If you buy any of these snacks at a convenience or grocery store, there’s no sales tax. Purchase them from a vending machine, however, and you can expect to pay sales tax. By the way, the bulletin lists a variety of snack chips and pieces, including trail mixes, pig skins, and rather specifically Fritos Honey BBQ Flavor Twists.

Unpopped popcorn, no; Popped popcorn, yes. Potato chips, pretzels and the likes are not taxed. Nor is unpopped popcorn, whether it’s regular, caramel or kettle corn. But once those kernels get heated into fluffy goodness, they come with sales tax, according to Indiana law.

Cakes, no; Cake decorations, yes.

Oh, that popcorn is popped? There's sales tax with that.

This one gets complicated. Baked goods such as  cakes, the ingredients to make cakes and tubes of icing are not subject to state sales tax but cake decorations are.

Salad bars, yes; Raw veggie trays, no. The bulletin says all self-service foods, including salad bars, that are sold with utensils to consume them, falling under the prepared food heading. Veggie trays that are only cut and packaged by the seller are not taxed, just like the raw vegetables in the produce section themselves.

Olive oils and vegetable  oils, no; Liver oils, yes. Because the latter is considered a nutritional supplement, it is taxable.

Candied foods, yes. While raw fruit is not taxed, coat that apple in caramel and you can expect to pay sales tax before you endanger your teeth. Expect to pay sales tax if you cover those tax-free potato chips or nuts in chocolate, or indulge in your yen for almond bark. Take those nuts and turn them into beer nuts, or honey roast them and youll have to pay sales tax.

Call IndyStar reporter Shari Rudavsky at (317) 444-6354. Follow her on Twitter: @srudavsky.

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