It’s Halloween, and the media (and Reddit) are talking candy! Prices are up, and sales are down—for large and extra-large bags. Small bags? Sales are up, in total dollar terms.
In the age of affordability, consumers may be more discerning, according to Sally Lyons Wyatt, a global executive vice president and food industry adviser for the market research company Circana:
“People are very intentional and thoughtful about what they want to consume, not just for holidays, but in general. . . . I do believe we will still see softness overall with candy, but I don’t think Halloween is doomed.”
While candy will bring overall softness, the bigger question is whether any taxes are involved. A grab bag of tariffs, sales tax exemptions, and an interactive quiz, below the fold.
For candy, tariffs have made headlines—on cocoa (exempted after Halloween 2025), on sugar (very complex), and on certain packaging materials and ingredients from Canada (some tariffed at 50%). The real story, however, is buried in Hershey’s earnings, released on October 29, 2026:
The North America Confectionery segment reported segment income of $949.7 million in the third quarter of 2026, an increase of 66.2% versus the prior year period . . . . [This increase was] driven by net price realization, productivity program savings, tariff refunds, lower net commodity costs, partially offset by lower volumes and increased advertising and related consumer marketing investments.
Emphasis added. Third-quarter tariff refunds contributed roughly $0.22 per share to adjusted earnings. More broadly, Hershey’s slightly lowered its organic sales growth guidance, while raising its guidance on earnings-per-share growth. The company is “not looking at overall price cuts to drive volume.”
Incidence is a dynamic question, but a reasonable first cut—supported by Hershey’s earnings—is that something less than 100% of federal tariff refunds are reaching the American consumers who bore the brunt of the original payments. The political economy of the whole tariff thing also remains an open issue; perhaps next week will bring some clarity. But the tariff whipsaw’s consumption effects might be playing out in real time, and the admittedly blunt Pigouvian angle may be worth keeping in mind.
The counterpoint to this year’s tariff refunds is the perennial state-level distinction among sweets for sales tax purposes. The Streamlined Sales and Use Tax Agreement defines candy 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 preparations containing flour, and products qualifying as candy cannot require refrigeration. In some states, this distinction could even out year-over-year price increases for the preferred category of confections.
There’s some evidence that consumers respond to this tax notch. A 2020 study of Colorado’s candy tax finds that purchases of taxable candy declined by at least 11.2%, without a corresponding increase in purchases of flour-containing candy. More recent research, however, suggests that consumer responses to candy taxes may be relatively limited, compared to soda taxes. But neither study focuses on Halloween, when purchasers may plan their purchases and often buy candy for someone else to consume. Regardless, this tax wedge should continue to make a seasonal appearance in local news coverage.
Okay, time for the quiz:
Trick or Tax? The Halloween Candy Quiz
Under the Streamlined Sales and Use Tax Agreement, which of these Halloween treats legally qualify as candy? Click an answer to find out.
1. Twix
Candy
Twix contains flour in its crunchy cookie base. Under the Streamlined Sales Tax definition, that makes Twix not candy.
Not Candy
Twix contains flour in its crunchy cookie base. Under the Streamlined Sales Tax definition, that makes Twix not candy.
2. Kit Kat
Candy
Kit Kats contain flour in their tasty wafers. Under the Streamlined Sales Tax definition, that makes Kit Kats not candy.
Not Candy
Kit Kats contain flour in their tasty wafers. Under the Streamlined Sales Tax definition, that makes Kit Kats not candy.
3. Hershey’s Krackel
Candy
Krackel’s crisped rice contains rice flour. Under the Streamlined Sales Tax definition, rice flour counts as flour. That makes Krackel not candy.
Not Candy
Krackel’s crisped rice contains rice flour. Under the Streamlined Sales Tax definition, rice flour counts as flour. That makes Krackel not candy.
4. Reese’s Peanut Butter Cups
Candy
Chocolate, peanut butter, sugar, and no flour. Reese’s Peanut Butter Cups qualify as candy, and they’re worth it.
Not Candy
Unlike Twix and Kit Kats, standard Reese’s Peanut Butter Cups do not contain flour. Legally, they are candy.
5. Candy Corn
Candy
Candy corn does not contain flour. But that does not make it candy. Candy corn is terrible.
Not Candy
Candy corn does not contain flour. It’s made from sugar, corn syrup, gelatin, artificial colors, and shellac, a coating derived from lac insect secretions. Yuk!
Disclaimer: These classifications follow the candy definition in the Streamlined Sales and Use Tax Agreement. Actual sales-tax consequences vary by state, and product ingredients can change. The candy corn question is intentionally unfair. Your answers are not recorded or scored.
Related TaxProf Blog coverage:
- SSRN Review & Roundup: Endean Reviews Calderón Gómez & Kane’s Pigou Goes Abroad (July 31, 2026)
- Liu & Zhang: Tariffs and the Progressive Fiscal Constitution (Mar. 15, 2026)
- Gopinath and Neiman, “The Incidence of Tariffs: Rates and Reality” (NBER) (Jan. 6, 2026)
- Should We Tax Soda? An Overview of Theory and Evidence (July 26, 2019)
- What Halloween Can Teach Your Kids About Taxes (Oct. 31, 2010)
- The Case Against Pigouvian Taxes on Sugar-Based Drinks (June 24, 2009)
