CO GIL 11-010 Sales & Use Tax 2011-06-01

Is liquor-filled candy exempt from Colorado sales tax as food, or is it taxable?

Short answer: It's taxable. Liquor-filled candy does not qualify as 'food' under the federal SNAP and WIC definitions that Colorado uses for its food exemption, so it's subject to Colorado state sales and use tax (and state-administered local tax) and does not get the food-for-home-consumption exemption. (This is a General Information Letter: general guidance only, not binding on the Department.)

Disclaimer: This is a Colorado Department of Revenue General Information Letter (GIL) — a general discussion of the tax law that represents the good-faith opinion of Department personnel. A GIL is NOT binding on the Department and CANNOT be relied upon as a ruling by any taxpayer. It does not address sales or use taxes administered by self-collected home-rule cities and counties. This summary is informational only and is not legal or tax advice. Consult a licensed Colorado tax professional about your situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A Colorado retailer that sells liquor-filled candies asked whether they're exempt from sales tax as food. The Department's clear (non-binding) answer: no — liquor-filled candy is taxable.

Colorado exempts the sale of food for domestic home consumption from state sales and use tax. But to qualify, a product has to meet the federal definition of "food" used by the SNAP (food stamp) and WIC programs, which Colorado adopts in § 39-26-102(4.5). Liquor-filled candy does not qualify as "food" under those federal programs, so it falls outside Colorado's food exemption and is subject to state sales and use tax and state-administered local tax.

(The result fits the broader pattern: Colorado's "food" exemption rises and falls with the federal SNAP/WIC definition, which excludes alcoholic beverages and products like these.)

What this means for you

Candy, confection, and specialty-food retailers

Don't assume everything sold as "candy" is exempt food. Liquor-filled candy is taxable because it isn't SNAP/WIC-eligible food. When a product contains alcohol or otherwise falls outside the federal food definition, charge sales tax. The SNAP/WIC eligibility of a given product is the test, not whether it looks like a grocery item.

Accountants and tax professionals

This is a one-line application of § 39-26-102(4.5): if the item isn't "food" under 7 U.S.C. § 2012(g) (SNAP) and the WIC program, the Colorado food exemption doesn't apply. Liquor-filled candy is squarely taxable at the state and state-administered local level.

Common questions

Q: Is liquor-filled candy exempt from Colorado sales tax as a food?
A: No. It doesn't qualify as "food" under the federal SNAP/WIC definition Colorado uses, so it's taxable — the food-for-home-consumption exemption doesn't apply.

Q: Why does the federal definition decide this?
A: Colorado's food exemption is tied to the SNAP/WIC definition of food (§ 39-26-102(4.5)). If a product isn't SNAP/WIC-eligible food, it isn't exempt food for Colorado sales tax.

Q: Can I rely on this letter?
A: It's a General Information Letter — non-binding general guidance. It clearly states the Department's view, but a binding answer would require a private letter ruling.

Citations and references

Statutes and rules:
- § 39-26-102(4.5), C.R.S. (definition of food, tied to SNAP/WIC)
- 7 U.S.C. § 2012(g) (federal Food Stamp Program definition of food)

Related rulings

[[plr-11-008-private-letter-ruling]] — food vs. dietary supplement (SNAP/WIC label test)
[[gil-13-028-bagged-or-packaged-salads]] — food vs. taxable prepared/excluded food
[[plr-25-004-sales-tax-exemption-for-items-sold-by-bakery]] — food-for-home-consumption exemption

Source

Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-11-010.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-11-010
June 1, 2011

XXXXXXXXXXXXXXXXX
ATTN: XXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
Re: Taxability of Liquor-filled Candy
Dear XXXXXXXXXXXXX,
You submitted on behalf of XXXXXXXX (“Company”) a request for guidance on the application of
sales tax on liquor-filled candies. The department issues general information letters and private letter
rulings. A general information letter provides a general overview of the relevant tax issues and is not
binding on the department. A private letter ruling provides a specific determination for a specific set
of facts, is binding on the department but not the taxpayer, and requires payment of a fee. For more
information about general information letters and private letter rulings, please see Department
regulation 24-35-103.5 at www.taxcolorado.org > FYI/Publication > Rulings.
The department initially treats your request as one of a general information letter. If you would like
the department to issue a private letter ruling on the issues you raise, you can resubmit a request
and fee in compliance with regulation 24-35-103.5. It is important to remember that general
information letters, such as this one, are general discussions of tax law and are not a determination of
the tax consequence of any particular action or inaction.
Issue
Does Colorado sales tax apply to liquor-filled candies?
Background
Company operates retail stores in Colorado and sells, among other things, liquor-filled candies.
Discussion

Colorado exempts from state sales and use tax the sale of food for domestic home consumption. In
order to qualify for this exemption, the food product must qualify as “food” in 7 U.S.C §2012(g)
(federal food stamp program) and (Women, Infants, and Children program). See, §39-26-102(4.5),
C.R.S. Liquor-filled candy does not qualify as food under these federal programs and, therefore,
does not qualify as exempt food for state sales and use taxes and state-administered local sales tax
purposes.
Miscellaneous
Pursuant to state law and department regulation 24-35-103.5, noted above, the Department will make
public a redacted version of this letter. Your letter requesting this general information letter is not
made public. I enclose a proposed redacted version of this letter. Please contact me within 60 days
from the date of this letter if you have any questions, comments, or objection concerning the redacted
letter.
I hope this is helpful. Please feel free to contact me if you have any questions.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue