Soft drinks, candy, and dietary supplements are taxed at the full state and local sales tax rate in most states, even where regular groceries are exempt or taxed at a reduced rate. The reason is definitional: under the framework used by roughly half the states, “food and food ingredients” qualifies for a tax break, but these three categories are specifically carved out of that definition and treated like any other retail purchase. Whether you pay the grocery rate or the full rate on a given item turns on details printed on the label, such as sweeteners, flour, milk, juice percentage, and whether the FDA requires a Supplement Facts panel.
The gap at the register is real. In states that fully exempt groceries, bread, milk, and eggs ring up at 0% sales tax, while a bottle of sweetened iced tea, a bag of gummy bears, and a bottle of multivitamins in the same cart get hit with the full combined rate. That combined rate runs from around 4% to above 11% depending on where you live.
What Counts as a Soft Drink
The Streamlined Sales and Use Tax Agreement, which supplies the standardized definitions many states use, classifies a soft drink as any non-alcoholic beverage that contains natural or artificial sweeteners.1Streamlined Sales and Use Tax Agreement. Streamlined Sales and Use Tax Agreement – Definitions Carbonation is irrelevant. A sweetened flat water, a sweetened bottled tea, and a cola are all soft drinks under this rule. The trigger is the sweetener, not the bubbles.
Three exclusions pull beverages back out of the soft drink category. A drink is not a soft drink if it contains milk or milk products, if it contains soy or rice milk substitutes, or if it is more than 50% vegetable or fruit juice by volume.2Streamlined Sales Tax Governing Board. Food Definition Issues
The milk exclusion is broader than most shoppers realize. A bottled chocolate milkshake sweetened with sugar is not a soft drink because it contains milk products. A ready-to-drink protein shake made with whey also falls outside the definition and is typically taxed as food. What matters is whether milk or a milk substitute appears in the ingredients at all, not how much.
The 50% juice rule creates another dividing line. A juice blend that is 51% fruit juice by volume is treated as food, even with added sugar. A fruit-flavored drink with 10% real juice and added sweeteners is a soft drink. The percentage printed on the packaging controls.
Bottled and canned coffee and tea catch many shoppers off guard. A sweetened bottled iced tea with no milk ingredients is a soft drink and taxed at the full rate. Unsweetened black tea or plain black coffee contains no sweeteners and falls outside the definition entirely. The same brand of tea can sit on the same shelf with two different tax treatments depending on whether sugar appears in the ingredients.
What Counts as Candy
Candy is defined as a preparation of sugar, honey, or other sweeteners combined with chocolate, fruits, nuts, or similar ingredients, sold in the form of bars, drops, or pieces.3Streamlined Sales Tax Governing Board. Rule 327.8 – Food and Food Ingredients Definitions – Candy That form requirement keeps bulk baking syrups and liquid flavorings out. A bag of caramel drops is candy; a jar of caramel sauce is not.
Two ingredients can flip an item’s classification. If a product contains flour, it is not candy under this definition, regardless of how it looks or how the manufacturer markets it.3Streamlined Sales Tax Governing Board. Rule 327.8 – Food and Food Ingredients Definitions – Candy A Kit Kat bar, which has a wafer layer made with flour, is legally food and taxed at the lower grocery rate in states that use this definition. A solid milk chocolate bar sitting right next to it, with no flour in the recipe, is taxed at the full rate.
Refrigeration is the second flipper. Under the standardized rule, candy must require no refrigeration.1Streamlined Sales and Use Tax Agreement. Streamlined Sales and Use Tax Agreement – Definitions A chocolate-covered cheesecake bite that has to stay cold is not candy for tax purposes, even though a reasonable person would call it a confection.
What Counts as a Dietary Supplement
Federal law defines a dietary supplement as a product intended to supplement the diet that contains one or more dietary ingredients such as vitamins, minerals, herbs, amino acids, or similar substances.4Office of the Law Revision Counsel. 21 USC 321 – Definitions Generally It must be intended for ingestion in a form like a tablet, capsule, powder, or liquid, and it cannot be represented as a conventional food or as the sole item of a meal.
For sales tax purposes, the practical identifier is the label. If the FDA requires the product to carry a “Supplement Facts” panel rather than the standard “Nutrition Facts” panel, the product is a dietary supplement and loses any grocery tax exemption.5eCFR. 21 CFR 101.36 – Nutrition Labeling of Dietary Supplements Vitamin gummies shaped and flavored like fruit snacks, powdered greens mixed into smoothies, and liquid collagen shots all carry the Supplement Facts label and are all taxed at the full rate.
The form does not change the outcome. Pill, gummy, powder, or liquid, the Supplement Facts label is what matters. A product marketed as a health drink but labeled with a Supplement Facts panel is a dietary supplement, not a beverage, for tax purposes.
How the Tax Compares to the Grocery Rate
Under the standardized framework, “food and food ingredients” means substances sold for ingestion by humans that are consumed for their taste or nutritional value. That broad category generally qualifies for a sales tax exemption or a reduced rate. The definition explicitly excludes soft drinks, candy, dietary supplements, and alcoholic beverages.2Streamlined Sales Tax Governing Board. Food Definition Issues The excluded items are treated as ordinary taxable goods.
Registers apply this automatically by linking each product’s barcode to its tax classification, so most shoppers never notice the different rates until they look closely at a receipt. Not every state follows this pattern. A handful tax all food at the same rate as general merchandise, which makes the distinction irrelevant. Others have their own definitions of candy, soft drinks, or supplements that differ from the standardized framework.
Buying These Items With SNAP
Federal law prohibits states from collecting sales tax on any purchase made with SNAP benefits. The statute is explicit: a state cannot participate in the program if it allows sales tax to be charged on food purchased with SNAP.6Office of the Law Revision Counsel. 7 USC 2013 – Establishment of Supplemental Nutrition Assistance Program Retailers cannot charge state or local tax on the SNAP-funded portion of any transaction.7Food and Nutrition Service. SNAP Retailer Notice – Sales Tax, Fees, and Refunds
Soft drinks and candy bought with SNAP are therefore completely free of sales tax, even though the same items are taxed at the full rate when paid for with cash or a credit card. Both categories are SNAP-eligible food. If a shopper splits a transaction between SNAP and cash, the retailer charges sales tax only on the items paid for with cash.
Dietary supplements are the exception. SNAP cannot be used to buy vitamins, medicines, or supplements at all. If a product carries a Supplement Facts label, it is ineligible for SNAP regardless of how it is marketed.8Food and Nutrition Service. What Can SNAP Buy? A shopper who wants a bottle of vitamin gummies has to pay with another form of payment and will owe the full sales tax.
Local Soda Excise Taxes
Several cities add a separate per-ounce excise tax on sugar-sweetened beverages on top of state and local sales tax. This is a different kind of tax. Sales tax is a percentage of the purchase price collected from the consumer at the register. A soda excise tax is a flat per-ounce charge, typically collected from distributors or wholesalers who pass the cost along through higher shelf prices. Shoppers in these cities pay both the excise tax baked into the retail price and the standard sales tax calculated at checkout.
As of early 2025, roughly eight cities impose these taxes. Boulder, Colorado charges 2 cents per ounce. Seattle charges 1.75 cents per ounce. Philadelphia charges 1.5 cents per ounce. Four California cities (Berkeley, Oakland, Albany, and San Francisco) each charge 1 cent per ounce. On a 12-pack of 12-ounce cans, that translates to an extra $1.44 to $2.88 depending on the city, before sales tax is calculated.
These excise taxes typically apply to beverages sweetened with sugar but not to diet drinks sweetened with artificial sweeteners alone. The sales tax soft drink definition makes no such distinction. A diet soda escapes the local excise tax but still qualifies as a taxable soft drink under the sales tax framework. A sugary soda in one of these cities gets hit by both.