Combine 1 cup sugar and 1/2 teaspoon vanilla in bowl. Spread onto waxed paper-lined baking sheet; let stand 4 hours or until dry. Sift sugar mixture through strainer to remove lumps. Set aside.
Heat oven to 375°F.
Combine 1 cup sugar and 3/4 cup butter in bowl. Beat at medium speed, scraping bowl often, until creamy.
Split vanilla beans lengthwise with sharp knife. Scrape seeds from vanilla beans; add to butter mixture. Add egg; continue beating until well mixed. Add flour, baking powder and salt; beat at low speed until well mixed.
Shape dough into 1-inch balls. Dip top of each ball in water, then into vanilla sugar. Place 2 inches apart onto ungreased cookie sheets. Bake 8-14 minutes or until edges are very lightly browned.
- After scraping seeds from vanilla bean, add empty vanilla bean pod to 2 cups sugar. Cover; store at room temperature in container with tight-fitting lid. Vanilla sugar made with vanilla extract or vanilla bean can be used for baking or sprinkled on fresh fruit, yogurt or in tea.
- Vanilla sugar can be stored after drying in a container with a tight-fitting lid.