DC increases sales tax on soft drinks, exempts tampons and diapers, and more

Several sales tax changes are on the horizon in Washington, D.C., due to the enactment of the fiscal year 2020 budget. The sales tax on soft drinks will increase. A long-awaited sales tax exemption for feminine hygiene products and diapers has been fully funded. And certain sales tax exemptions benefitting high-technology companies will be repealed.

Soft drinks are currently taxed at a rate of 6 percent in the District of Columbia. Starting October 1, 2019, the sales tax rate will jump to 8 percent. The additional 2 percent is expected to generate approximately $3.2 million in the 2020 fiscal year, and $11.9 million over the next four years.

Soft drinks are currently defined as a nonalcoholic beverage with artificial or natural sweeteners. As of October 1, 2019, the definition of “soft drink” is amended to exclude the following:

• Beverages that are 100 percent fruit or vegetable juice
• Beverages that are at least 50 percent milk or milk substitute (e.g., rice milk, soy milk, etc.)

The Council of the District of Columbia approved a sales tax exemption for diapers and feminine hygiene products in late 2016, but the effective date was delayed until it could be funded.

At long last, the fiscal year 2020–2023 budget fully authorizes and funds the feminine hygiene and diaper sales tax exemption. These products will be exempt from sales tax effective October 1, 2019.

Currently, eligible products and services sold by high-technology companies within the District are exempt from sales tax. High-technology companies are also able to purchase products for use in connection with the operation of the company without tax.

These exemptions are eliminated as of October 1, 2019. This is expected to generate almost $45,000 over the next four years.

Additional details will likely be provided by the District of Columbia Office of Tax and Revenue.

If you have an obligation to collect sales tax in Washington, D.C., and sell any of the above products into the District, sales tax software can facilitate compliance with these changes. Learn more.