Don’t sweat sales tax – Wacky Tax Wednesday

Don’t sweat sales tax – Wacky Tax Wednesday

Many states don’t tax sales of necessities like food for home consumption or prescription medicines. However, that doesn’t mean they exempt all necessities. Clothing is fully or partially taxed in most states, and I wouldn’t want anyone to leave home without it. I sometimes feel that way about deodorant and antiperspirant, too.

Most of the time I don't concern myself with the personal hygiene of others. But when my children hit that tween/teen stinky stage, I advised them to partake. Is it necessary? You tell me — after driving them home from cross country practice.

So, yes, antiperspirant and deodorant are sometimes necessary. Are they also exempt?

It depends on the state, the ingredients, or even the intended use of the product. For example, Texas provides a sales and use tax exemption for over-the-counter drugs containing a “drug facts” panel. Thus, to determine if a brand of antiperspirant or deodorant is taxable in Texas, it’s necessary to read the label. Some of Tom’s of Maine deodorant products should be taxable because they don’t have a drug facts panel, while Secret’s antiperspirant/deodorant should be exempt because it does (Publication 94-155).

My home state of Washington also provides a sales and use tax exemption for over-the-counter (OTC) drugs (with a “drug facts” panel or statement of “active ingredients”), but only if they’re prescribed by physicians for human use. I pay sales tax on the deodorant and antiperspirant I buy to keep my kids smelling sweet. Yet people suffering from the medical condition of hyperhidrosis, or abnormally excessive sweating, should be able to purchase OTC antiperspirant tax-free.

Although OTC medicated dandruff shampoo is exempt in New York, antiperspirants and deodorants are generally subject to sales tax. Antiperspirants and deodorants are also taxable in Pennsylvania if they’re “advertised or labeled for use as a body deodorant” — even if they have “a medicinal or curative value.”

New Jersey provides an exemption for OTC drugs (for human use). However, “the OTC drug exemption doesn’t apply to any grooming and hygiene product” [emphasis theirs].  The same is true in Minnesota and Vermont: OTC drugs are generally exempt, but grooming and hygiene products aren’t.

As a consumer, I don’t have to worry about sales tax so long as I can pay it. Businesses don’t have that luxury. Drug and grocery stores in Texas must scrutinize labels to determine how to tax deodorant and antiperspirant products, as does any business that sells those products in Texas and is required to collect and remit sales tax.

That’s the kind of quirkiness that makes sales tax compliance so complex, especially for businesses that sell into multiple states.

In fact, Chief Justice Roberts brought up how Texas taxes antiperspirant and deodorant in his dissenting opinion on South Dakota v. Wayfair, Inc. (June 21, 2018), the decision that overruled a long-standing physical presence rule and enabled states to tax remote sales. His point? “Correctly calculating and remitting sales taxes on all e-commerce sales will likely prove baffling for many retailers.”

Baffling indeed. Fortunately, automating sales tax compliance can make it less so.

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