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When October rolls around, most people think about pumpkins, sweets and costumes, not tax codes. Yet, behind some of Halloween’s most familiar traditions lie surprising examples of how taxation finds its way into even the most unexpected corners of life. From how you carve your pumpkin to whether your haunted house attracts paying guests, the reach of the tax system is wider and occasionally stranger than most realise.
Here are five Halloween-related taxes and rules that reveal just how spooky the world of indirect taxation can be:
1. The pumpkin tax
In several US states, pumpkins are taxed differently depending on how they’re used. A pumpkin purchased to eat, whether for soup, pie or roasting, is typically classified as food, meaning it’s exempt from sales tax. But the same pumpkin bought to carve into a jack-o’-lantern is treated as a decorative item, making it subject to tax.
This distinction stems from the principle of use-based tax classification, which determines taxability by intended purpose rather than the product itself. Retailers in states like Pennsylvania and Iowa even train staff to ask customers whether their pumpkins are for decoration or consumption, because that one answer determines how much tax you’ll pay.
2. The candy conundrum
Halloween is the biggest candy-selling season of the year in the US, yet not all sweets are treated equally for tax purposes. Many states define “candy” in their own way, leading to sometimes absurd results.
In Illinois, for instance, anything made primarily of sugar but containing flour is not legally considered candy. That means KitKats and Twix bars are taxed as food (and may be exempt), while Snickers and Skittles are taxed as candy. Minnesota has similar rules, taxing marshmallows but not chocolate-covered biscuits.
These definitions originate from efforts to distinguish prepared foods from confectionery, but in practice, they’ve created one of the sweetest examples of how complex and inconsistent sales tax systems can be.
3. The witchcraft tax
Centuries ago, practising witchcraft wasn’t just risky; it could be taxed. In the 16th and 17th centuries in Scotland, records suggest local authorities levied fines and fees on fortune-tellers, charm-sellers and herbal healers. These were less about encouraging magic and more about controlling it through a system of penalties and payments.
Today, while witchcraft itself is no longer subject to special taxation, its modern equivalents, such as tarot readers, psychics and spiritual healers, are often required to register as self-employed or obtain local business licences. In parts of the US, cities like Salem, Massachusetts (famous for its witch trials) require fortune-telling permits costing over $50 per year. Even in the mystical arts, indirect taxation still applies.
4. The costume clause
Costumes are a Halloween essential, but when can they become a deductible expense? Generally, a costume is only tax-deductible if it’s used exclusively for work and is not suitable for everyday wear.
For example, a stage performer, entertainer or even a social media influencer creating content for commercial purposes can claim their Halloween attire as a legitimate business expense. However, once that same outfit is worn to a personal event, it loses its deductible status. The principle is simple but often misunderstood: intent and exclusivity determine whether the expense belongs on your tax return or simply in your wardrobe.
5. The burial burden
Even death isn’t entirely free from the reach of tax. In the United States, most states exempt funeral and burial services from sales tax, recognising them as essential or compassionate services. However, the situation becomes less straightforward when you look beyond the ceremony itself.
Items such as coffins, urns, headstones and memorial accessories are often treated as tangible personal property, meaning they can attract state and local sales tax unless specifically exempted. The rules differ widely; in some states, caskets are taxable if sold separately but exempt when bundled within a funeral package. Others impose tax on flowers, memorial jewellery or printed remembrance materials.
By contrast, countries such as the UK and those in the EU typically apply VAT exemptions to funeral services, although related products, like gravestones or urns, may still be subject to standard rates.
Avoiding the horror story
While the rules can feel like a haunted forest, there are ways to keep the monsters at bay. Automation, accurate data and expert guidance are the silver bullets for today’s tax challenges. The right technology can identify risks before they strike, streamline compliance processes and ensure that every transaction is treated correctly, no spells required. At Innovate Tax, let us help exorcise your indirect tax fears and get in touch today.
