To the dismay of the health-conscious, candy and soft drinks are currently considered “food and food ingredients” in Arkansas. As such, they qualify for a reduced rate of sales and use tax: 1.5 percent instead of 6.5 percent. But tastes change. Beginning January 1, 2018, candy and soft drinks will no longer be “food or food ingredients,” and will therefore be taxed at the regular state rate of 6.5 percent, plus applicable local taxes. Ironically, taxes on the wholesale price of syrup used by beverage makers is set to decrease as soda taxes bubble up. The tax on soft drinks syrup and simple syrup, currently $2.00 per gallon, will drop to $1.26 on January 1. The rate “per gallon for each gallon of bottled soft drinks sold or offered for sale” will also drop slightly, from 21 cents to 20.6 cents. Simple syrup used in preparing tea drinks is exempt.

Candy

Arkansas defines candy as a preparation of honey, sugar, or other artificial or natural sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. It does not include preparations containing flour, or foods that require refrigeration. So, while M&Ms will see a tax increase, Twix will not.

Soft drinks

A soft drink is defined as a nonalcoholic beverage containing artificial or natural sweeteners, but no milk, milk products, or milk substitutes like soy or rice milk. Beverages with greater than 50 percent of vegetable or fruit juice by volume are also not considered soft drinks. A bottle of Starbucks Caramel Macchiato Iced Espresso will likely continue to be taxed at the reduced rate because it contains milk, while diet colas should see a tax increase. See the Arkansas Department of Finance and Administration and Act 141 for additional details about the upcoming rate change for candy and soft drinks.

Soda taxes bubbling up everywhere