How Much Sales Tax Does the Easter Bunny Pay?

March 21, 2008

Everyone knows that the Easter Bunny delivers Easter baskets to children every year. However, much remains unknown about the mysterious rabbit: his whereabouts the rest of the year, where he purchases his supplies, the source of his funding, etc. Since we focus on taxes here at the Tax Foundation, we decided, despite the lack of reliable data, to delve into the tax angle of this story and speculate on how much the Easter Bunny pays in sales taxes.

We will assume that he shops mainly at grocery stores, convenience stores, and drugstores. If he were human he would most likely not have to pay sales taxes because he would have an exemption as a nonprofit entity. However, to the best of our knowledge, no state has granted tax-exempt status to a rabbit, so we’ll assume that he pays sales taxes on his purchases.

We limited our analysis to one state for the sake of simplicity. We chose Iowa for two reasons. First, Iowa was home to the ridiculous pumpkin tax, which stipulated that pumpkins that were intended to be carved but not eaten would be taxed and pumpkins that were purchased for cooking were not taxable. We blogged about this and the story made the rounds of the internet. Finally Iowa lawmakers came to their senses and did away with the tax discrepancy. As we were calculating the Easter Bunny’s tax bill, it occurred to us that the same sort of policy could be applied to Easter eggs: A state could tax eggs that were bought for consumption but exempt eggs that were bought solely to be dyed or hunted on Easter but not eaten. Of course this sounds absurd, but it would be just as logical as the pumpkin tax. Luckily, we know of no state that has imposed an Easter egg tax, so the Easter Bunny does not have to pay sales taxes on the eggs he buys for dying unless he purchases them in a state that does not exempt groceries from the sales tax.

The second reason we chose Iowa is that the state has adopted the Streamlined Sales Tax Project‘s definition of candy, which is taxable in Iowa even though most food is not. One of the changes is that food containing flour is not considered candy anymore, even if most rational people would argue otherwise. For example, under the SSTP, classic Milky Way bars, which contain flour, are tax-exempt, while Milky Way Midnight (dark chocolate) bars are taxed because they do not contain flour. This obviously creates technical difficulties for retailers and confusion for consumers. Imagine the frustration this causes the Easter bunny, who purchases vast quantities of candy and other items in many different cities and states and must take into account all the different sales tax rates and regulations when determining his budget each spring.

Remembering each state’s rate and which items it applies to is hard enough, but remembering the differences among cities is even harder. In Iowa, as in many other states, local jurisdictions are allowed to levy local-option sales taxes and/or school infrastructure local-option sales taxes. The statewide rate is 5%, and cities may add another 1-2% on top of that. Assuming that the Easter Bunny is a bargain hunter and hops from city to city to get the best deal, he must travel with a chart listing the sales tax rate in each city. He probably prints this chart from the Iowa Department of Revenue website and this list of which items are taxed and consults them every time he takes an item off the shelf, which probably wastes time.

The chart below shows the basic items in a typical Easter basket, not counting small toys or additional candy that parents may add. For the sake of simplicity we assume that every basket he delivers contains the same items. The total per-basket tax bill of 42 cents is not all that important; the thing to consider is whether it should be this complicated for a renowned, hardworking, generous rabbit who brings so much joy to children to figure out how much sales tax he owes. If it’s that hard for the Easter Bunny, imagine how hard it must be for humans.

(Click here if you’re having trouble viewing this chart.)

Easter Bunny’s Iowa Sales Tax Bill for One Easter Basket

Item and Amount
Used per Basket

Price (a)

Price per Basket

City Where Purchased

Tax Rate (State Rate of 5% Plus Local Rate)

Tax per
Basket

Basket

$1.99

$1.99

West
Burlington

7%

$0.14

Easter grass, 1/2 package

2 packs for $3.00

$0.75

Farnhamville

5.5%

$0.04

4 plastic eggs

$5 for 24 eggs

$0.84

Moorland

6%

$0.05

Jelly beans to fill plastic eggs, 1/4 package

$2.00 per package

$0.50

Yarmouth

7%

$0.04

Hershey’s Whoppers Mini Robin’s Eggs malted milk balls
to fill plastic eggs, 1/3 package

2 packs for $3.00

$0.50

Kingston

7%

exempt
because they contain flour

Chocolate rabbit

$2.50

$2.50

Adair

6%

$0.15

3 dyed eggs
(Easter Bunny mixes his own plant-based dyes; no commercial dyes were purchased, only plain eggs)

2 dozen for $3.00

$0.38

Sperry

7%

exempt (food)

Total

$7.46

$0.42

(a) Prices were found at ShopLocal.com.


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