Sometimes, when a state is an oddball, it’s easier to remember. For example, I will probably never in all my life forget that New Jersey exempts household paper products. It’s the only one. When a state sets itself apart, it gives those of us working in the sales tax industry a fun fact to throw around to our friends and family. Note: Do not actually try these fun facts on your friends and family if you want them to continue liking you.
Today Alabama joins the Sales Tax Secrets list of quirky states thanks to its excise tax on lubricating oil. According to state law, dealers of motor oil are to pay a $.02/gallon excise tax that cannot be passed on to the consumer. The state explains it in this FAQ. Basically, sales of motor oil are exempt from sales tax in Alabama, so if your car breaks down there, you are stuck in Alabama, but the oil you may need to fix it is tax free.
Be really careful when you’re searching for oil in your inventory, especially if you’re not a car aficionado. There are liquids intended to clean engines and perform a variety of other tasks that may come off like oils at first glance. There are also oils that seem like something entirely different. Furthermore, there are plenty of oils like kerosene used as fuel that are not exempt. The key here is that the exempt oil is intended for lubrication in motor vehicles. If you have your sales-tax-humor thinking cap on, get to work. Maybe start with, “That tax is more slippery than…”