Halloween is a signifier of many things. It brings to mind the fall season, children running around in costumes, carving pumpkins, baking apple pies, and eating candy. Few look at the picture below and think about paying sales tax. But sales tax applies to many things, including Halloween items. Here are a few sales tax facts to consider this Halloween.
In New York State, sales of pie pumpkins, gourds and other items sold in supermarkets that are used by a purchaser in cooking pies, cakes, breads, cookies, etc., are exempt from New York sales tax because they constitute food sold for human consumption. However, decorative and carving pumpkins (including decoration gourds) are not being marketed or sold in their normal or intended use for human consumption.
Thus, decorative pumpkins and gourds, and carving pumpkins, whether sold in supermarkets, farm stands, nurseries or other businesses are not sold as “food” and constitute tangible personal property subject to sales tax. So, if you are buying a pumpkin which you will use to bake a pie then it is exempt from New York sales tax. However, if you are buying a carving pumpkin to carve a jack-o-lantern, that pumpkin is subject to New York sales tax.
In addition, generally, food, food products, beverages, dietary foods and health supplements sold for human consumption are not subject to New York sales tax. However, the exemption does not apply to candy and confectionery. Therefore, Halloween candy is subject to New York sales tax.
Also, beginning April 1, 2012, there is an exemption from New York state sales and use tax for clothing, footwear and items used to make or repair clothing, costing less than $110 per item or pair. This exemption does not apply to locally imposed sales and use taxes unless the county or city imposing those taxes elected the exemption.
For purposes of the exemption, the term "clothing and footwear" is defined to mean: clothing and footwear to be worn by human beings. This does not include costumes or rented formal wear; fabric, thread, yarn, buttons, snaps, hooks, zippers and like items that are used or consumed to make or repair such clothing (other than costumes or rented formal wear) and become a physical component part of the clothing. Therefore, the pants you buy to take you child trick-or-treating are exempt from New York sales tax but your child’s Halloween costume is subject to New York sales tax.
New York state sales tax is complicated and most areas are not straight forward. Sometimes the use of an item dictates whether and item is subject to sales tax. If sales tax is this complex for Halloween items, imagine how complicated they can be when considering whether your business needs to collect sales tax.
Amanda Roth is a senior tax manager at Freed Maxick CPAs.