Prepare coating by stirring together ingredients in a shallow mixing bowl. Set aside.

Heat the water, sugar, salt, and oil in a medium-sized pot and bring to a slow boil. Lower heat and add in flour, stirring with a wooden spoon, until dough forms a soft ball. Remove from heat and allow to cool slightly; stir in beaten egg and mix vigorously until incorporated. (You may find it easier to use an electric hand mixer, but you can do it by hand too.)

Fit a pastry bag with a large star tip and fill it with dough. The dough will squeeze out best while it’s still very warm, so don’t wait for it to cool off.

In a separate pot, heat three to four inches of oil and bring to a temperature of 350°F (175°C). If you don’t have a candy thermometer, sprinkle a bit of water into the oil; if it quickly bubbles up and disappears, the oil is ready. Carefully pipe dough mixture into the preheated oil in about four to five-inch lengths. Cut the end with a clean pair of scissors. Let fry until golden brown, about two to three minutes per side, and transfer to a paper-towel-lined dish. (Make sure the churros are completely browned before removing from the oil, or they may still be a bit doughy in the center.) Allow to drain for a few seconds, then transfer to the spicy sugar mixture and roll to coat.

Repeat process with remaining dough; serve warm with caramel sauce or chocolate ganache for dipping, if desired.