What Illinois sales tax rate applies to home-baked goods (like flour-based baked goods vs. fudge or no-bake cookies) sold for pickup, delivery, or shipping, and does the rate change when selling at farmers' markets or other venues?

Plain-English summary

A taxpayer starting a home baking business under Illinois's Cottage Food Law asked the Department what sales tax rate applies to items like cookies, cakes, pies, and breads (which contain flour) versus fudge or no-bake cookies (which do not), and whether the rate changes if sold from home, delivered, shipped within Illinois, or sold at farmers' markets, events, or venues.

The Department could not address the Cottage Food Law itself (410 ILCS 625/4), but explained the applicable sales tax framework under 86 Ill. Adm. Code 130.310, "Food, Soft Drinks and Candy":

• Food for human consumption, to be eaten off the premises where sold (not prepared for immediate consumption, and not alcoholic beverages, cannabis-infused food, soft drinks, or candy), is taxed at the lower 1% state rate plus applicable local taxes.
• Candy, soft drinks, and food prepared for immediate consumption are taxed at the higher 6.25% state rate plus applicable local taxes.
• Candy is defined as a sugar/sweetener preparation combined with chocolate, fruit, nuts, or other ingredients in bar, drop, or piece form -- but it specifically excludes any preparation containing flour or requiring refrigeration. So a product containing flour (or needing refrigeration) cannot be "candy" even if it otherwise fits the definition.
• Soft drinks are non-alcoholic, sweetened beverages, but the definition excludes beverages containing milk or milk products, soy, rice, or similar milk substitutes, or more than 50% fruit/vegetable juice by volume -- those fall back into the "food" category instead.

Applying this, flour-based baked goods (cookies, cakes, pies, breads) are "food" taxed at 1%, while flourless items like fudge or no-bake cookies are "candy" taxed at 6.25%. Adding pretzels or crumbled cookies (which contain flour) to fudge would take it out of the "candy" definition, making it taxable as food at 1% instead. Critically, none of this changes based on the sales channel -- the same rate rules apply whether selling from home, delivering, shipping in-state, or selling at a farmers' market, event, venue, or canopy setup.

What this means for you

Home bakers and cottage food businesses

Your sales tax rate turns on the recipe, not on where or how you sell. If your baked good contains flour (cookies, cakes, pies, breads), it is taxed as "food" at the lower 1% state rate plus local tax, regardless of whether it's sold from home, delivered, shipped, or sold at a farmers' market or event. If it contains no flour and doesn't require refrigeration (like classic fudge or no-bake cookies), it is "candy" at the higher 6.25% rate. Adding a flour-containing ingredient (like crumbled cookies or pretzels) to an otherwise flourless item can move it out of the "candy" definition.

Farmers' market and event vendors

The venue does not change the tax rate -- selling at a farmers' market, art show, event, or under a canopy outside a business does not create a different rate than selling from a storefront or home. The Department pointed to 86 Ill. Adm. Code 130.2045 as additional guidance for retailers at fairs, art shows, and flea markets, and 86 Ill. Adm. Code 130.530 for multi-location registration issues.

Accountants and tax professionals

The controlling framework is 86 Ill. Adm. Code 130.310's definitions of "food," "candy," and "soft drinks." The flour/refrigeration carve-out from the "candy" definition is the key rate-determining fact for baked goods, not the sales channel. Note the Department expressly declined to interpret the Cottage Food Law (410 ILCS 625/4) itself -- this GIL addresses only the sales/use tax rate question.

Common questions

Q: What tax rate applies to cookies, cakes, pies, and breads that contain flour?
A: The lower 1% state sales tax rate plus applicable local taxes, because they qualify as "food" for human consumption to be eaten off the premises, not "candy."

Q: What about fudge or no-bake cookies that don't contain flour?
A: These are taxed as "candy" at the higher 6.25% state rate plus applicable local taxes, because they meet the sugar/sweetener-and-ingredient definition of candy and contain no flour and require no refrigeration.

Q: If fudge contains pretzels or crumbled cookies, does that change the rate?
A: The ruling indicates that once flour is present in the preparation (e.g., via pretzels or crumbled cookies), the item falls outside the "candy" definition (which excludes anything containing flour), so it would be taxed as food at 1% instead of as candy at 6.25%.

Q: Does the tax rate change if I sell at a farmers' market, event, or from a canopy instead of my home?
A: No. The letter does not identify any rate difference based on sales venue -- the same food/candy/soft-drink classification and rates apply regardless of where or how the sale takes place (pickup, delivery, or shipping within Illinois).

Q: Does this letter address the Cottage Food Law?
A: No. The Department explicitly stated it cannot provide information relating to 410 ILCS 625/4, the Cottage Food Law; this GIL addresses only the sales/use tax rate questions.

Citations and references

• 86 Ill. Adm. Code 130.310 (Food, Soft Drinks and Candy)
• 86 Ill. Adm. Code 130.310(c)(1) (definition of "food")
• 35 ILCS 120/2-10; 86 Ill. Adm. Code 130.310(d)(6)(B) (definition of "soft drinks")
• 35 ILCS 120/2; 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax)
• 35 ILCS 105/3; 86 Ill. Adm. Code 150.101 (Use Tax)
• 86 Ill. Adm. Code 130.530 (multi-location returns)
• 86 Ill. Adm. Code 130.2045 (retailers at fairs, art shows, flea markets)
• 410 ILCS 625/4 (Cottage Food Law; not addressed by the Department here)
• 2 Ill. Adm. Code 1200.110 (PLR procedures); 2 Ill. Adm. Code 1200.120 (GIL procedures)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2022.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2022/st22-0013-gil.pdf

Original ruling text

ST-22-0013 06/21/2022 FOOD
This letter discusses the State tax rate applicable to sales of food. See 86 Ill.
Adm. Code 130.310. (This is a GIL.)
June 21, 2022
NAME
ADDRESS
Dear NAME:
This letter is in response to your letter dated May 20, 2022, in which you
requested information. The Department issues two types of letter rulings. Private Letter
Rulings (“PLRs”) are issued by the Department in response to specific taxpayer
inquiries concerning the application of a tax statute or rule to a particular fact situation.
A PLR is binding on the Department, but only as to the taxpayer who is the subject of
the request for ruling and only to the extent the facts recited in the PLR are correct and
complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General
Information Letter (“GIL”) is to direct taxpayers to Department regulations or other
sources of information regarding the topic about which they have inquired. A GIL is not
a statement of Department policy and is not binding on the Department. See 2 Ill. Adm.
Code 1200.120. You may access our website at www.tax.illinois.gov to review
regulations, letter rulings and other types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
I am starting up a home baking business under the Cottage Food
Law. I have a question on the tax. rate of a product containing flour
vs a product that does not. My food sold from my house is not for
immediate consumption. It will be either, pick it up and leave or I
may deliver it to their address. Plus, I plan to offer shipping within
the state of Illinois.
My understanding is the tax rate for cookies, cakes, pies, breads,
and such that contain flour are at a 1% tax rate but 1) what about
products that do not contain flour, such as fudge? 2) What tax rate
would be fudge or no bake cookies (no flour used)? 3) Then, if the
fudge had pretzels in it or crumpled cookies, what would that tax
rate be?
Would the tax rate change if I were selling elsewhere, like a
farmers' markets, events, venues and or a canopy set up outside of
businesses?

COMPANY/NAME
Page 2
June 21, 2022
I look forward to getting your responses so that I can be sure to do
things correctly
DEPARTMENT’S RESPONSE:
As an initial matter, the Department cannot provide any information relating to
410 ILCS 625/4, commonly known as the Cottage Food Law.
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged
in this State in the business of selling tangible personal property to purchasers for use
or consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is
imposed on the privilege of using, in this State, any kind of tangible personal property
that is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as "sales" tax in Illinois.
If the purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at
the time of purchase. The retailers are then allowed to retain the amount of Use Tax
paid to reimburse themselves for their Retailers' Occupation Tax liability incurred on
those sales. If the purchases occur outside Illinois, purchasers must self-assess their
Use Tax liability and remit it directly to the Department.
Please see the Department’s Regulation entitled “Food, Soft Drinks and Candy”
at 86 Ill. Adm. Code 130.310 which can be found on the Department’s website. As you
can see in the regulation, food for human consumption that is to be consumed off the
premises where it is sold (other than alcoholic beverages, food consisting of or infused
with adult use cannabis, soft drinks, candy and food that has been prepared for
immediate consumption) is taxed at the lower state tax rate of 1% plus applicable local
taxes.
In contrast, candy, soft drinks and food that has been prepared for immediate
consumption are taxed at the higher State sales tax rate of 6.25% plus applicable local
taxes. The regulation defines “food” as any solid, liquid, powder or item intended by the
seller primarily for human internal consumption, whether simple, compound or mixed,
including foods such as condiments, spices, seasonings, vitamins, bottled water and
ice. 86 Ill. Adm. Code 130(c)(1).
The term “soft drinks” means non-alcoholic beverages that contain natural or
artificial sweeteners. "Soft drinks" do not include beverages that contain milk or milk
products, soy, rice or similar milk substitutes, or greater than 50% of vegetable or fruit
juice by volume. 35 ILCS 120/2-10; 86 Ill. Adm. Code 130.310(d)(6)(B). Thus, if a
beverage contains a natural or artificial sweetener but also contains milk or milk
products, soy, rice or similar milk substitutes, or greater than 50% of vegetable or fruit
juice by volume, it will not fall within the definition of “soft drink” but, rather, it will fall
within the definition of food.

COMPANY/NAME
Page 3
June 21, 2022
“Candy” is defined as a preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings
in the form of bars, drops, or pieces. “Candy” does not include any preparation that
contains flour or requires refrigeration. Thus, if a product contains flour or requires
refrigeration, it would not be considered “candy” even if it meets all the other elements
of the definition.
It may also be helpful to review 86 Ill. Adm. Code 130.530 Returns Covering
More Than One Location Under Same Registration -- Separate Returns for Separately
Registered Locations, and Section 130.2045 Retailers on Premises of the Illinois State
Fair, County Fairs, Art Shows, Flea Markets and the Like
I hope this information is helpful. If you require additional information, please
visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.
Very truly yours,
Richard S. Wolters
Associate Counsel
RSW:rkn