Children who take their carefully counted coins to the candy store are in for a shocking life lesson in finance — they now have to pay a sales tax of at least 8.4 percent on their purchases.

“We now have to be prepared for children who come in with a set amount to spend,” said Julie McCulloch, co-owner of the Elevated Ice Cream and Candy Store in Port Townsend.

“Kids are very familiar with how far their money goes.”

In an attempt to bridge the state budget gap, the state enacted a sales tax on candy and chewing gum that went into effect Tuesday.

The additional sales revenue is projected to net $30.5 million annually, plus an additional $33.8 million in taxes on bottled water, which also took effect on Tuesday, according to Mike Gowrylow, state Department of Revenue communication director.

The state sales tax rate is 6.5 percent, while Clallam and Jefferson counties add another 1.9 percent, for 8.4 percent total paid on taxable purchases.

Sequim has an additional tax, for 8.6 percent total.

Revenue for counties, cities

While a portion of those taxes will go back to county and city coffers, Gowrylow said it’s difficult to tell how much that will be.

He added the department of revenue is working on a methodology that local governments can use to determine how much the candy and bottled water taxes will generate in their counties.

It is expected to be completed and available to local governments this week.

“The reason for this paper is that we have had a lot of folks ask about this, and we do not want to get into the business of repeatedly doing this analysis for people,” Gowrylow said.

Clallam County Treasurer Judy Scott and Jefferson County Treasurer Judi Morris agreed that at this point they have no way to calculate how much “candy tax” will come back to their counties.

“We have no way of knowing,” Scott said. “We don’t get a breakdown [of those funds].”

Candy versus food

Stores that sell candy, from supermarkets to corner stores, have had to reprogram their cash registers to identify what is taxable as candy and what is still exempt as food.

According to the state rule for the category, 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.”

Additionally, the tax doesn’t affect candy that doesn’t contain flour. That’s where it gets tricky.

“There are things that you don’t know have flour,” McCulloch said. “Some licorice does, and some doesn’t.”

A Snickers bar is taxable, while a Kit Kat, which contains flour in the wafer layer, is not.

McCulloch said candy sales make up about 30 percent of their business, which also sells handmade ice cream and gifts.

In Port Angeles, Lindi Lumens, co-owner of Northwest Fudge and Confections said she hasn’t seen the tax affect business yet.

Instead of adding tax, the owners have taken a different approach.

“We’ve raised our prices to include the tax, then we’ll back it out at the end of the month,” Lumens said.

More difficult was deciding which of their merchandise is considered candy under the law.

“I think we should be paying taxes on candy — I always have — but I think the way they did it is stupid,” she said, also referring to flour being the deciding factor.

The Lumens, Bob and Lindi, also make fudge, nut brittles and chocolates for the shop, but aren’t sure how the new law will affect their purchases from suppliers.

Under the law, baking chocolate that does not contain sugar is not taxed, while semisweet baking chocolate, including chocolate chips, is taxed.

“We don’t want to get taxed twice,” Lindi Lumens said.

The Department of Revenue acknowledges retailers haven’t had time to digest all the new rules, so it has compiled a list of more than 3,000 “candy items and items similar to candy,” available on the website http://dor.wa.gov.

For bottled water, the definition is less complicated.

It covers “bottled water that does not contain sweeteners, but may contain antimicrobial agents; fluoride; carbonation; vitamins, minerals and electrolytes; oxygen; preservatives and flavors, extracts or essences derived from a spice or fruit.”

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Features Editor Marcie Miller can be reached at 360-417-3550 or marcie.miller@peninsuladailynews.com.