Chicago Candy Sales Tax

Tax Rules for Candy

In Chicago, how candy is taxed depends on its ingredients:

• Candy with flour (e.g., chocolates, ice cream):
  These are classified as “food” and are taxed at the standard food rate.
• Candy without flour (e.g., hard candies, suckers):
  These are classified as “candy” and are taxed an additional 5.25% merchandise rate

Note: A similar distinction applies to soft drinks.
The level of soy, milk, or fruit juice in a beverage can determine whether it is taxed at the food rate or with an added 5.25% merchandise tax

Bakery Exceptions

Clarification from the Illinois Department of Revenue

The Department has issued a letter ruling on how bakeries should apply tax rates when:

• They sell both ready-to-eat items and grocery-type items, and
• Provide facilities for on-premises consumption

Conditions for Applying Lower Tax Rate

Bakery items may be taxed at the lower food rate if both of the following conditions are met:

1. Physical Separation of Areas
   • The area for on-premises consumption must be physically separated or distinguishable from the area where non-immediate consumption items are sold
   • Definition of “Physically Separated”:
     • Tangible barrier
     • Arrangement of display cases, service counters, or stub walls
     • Any setup that creates a partially isolated eat-in area
2. Separate Recording and Accounting Systems
   • This includes:
     • Cash registers that separately identify high-rate and low-rate sales
     • Separate cash registers
     • Any system that records the different tax rates at the time of collection

Chicago candy sales tax