California reconsiders sales tax exemptions for diapers and tampons
- May 10, 2019 | Gail Cole
Update 7.16.2019: Diapers for infants, toddlers, and children will be exempt from California sales and use tax from January 1, 2020, until January 1, 2022, as will menstrual hygiene products. See SB 92 for additional details.
More than almost any other items, people often push to exempt diapers and feminine hygiene products from sales and use tax. So-called tampon tax exemptions have swept the country (and globe) in recent years, with diaper exemptions hot on their heels. California could be the next state to embrace them.
The argument for exempting these products is usually that they’re essential and affect the health and well-being of certain segments of the population. For households struggling to pay for these essentials, the added sales tax can be a hardship.
The argument against exempting diapers and menstrual products is usually that sales tax should be broad and neutral. To quote the Tax Foundation’s Principles of Sound Tax Policy: “The purpose of taxes is to raise needed revenue, not to favor or punish specific industries, activities, and products.” That said, a wide variety of goods and services are exempt from tax across the United States and abroad, including lift tickets in Maine and exotic meat in the UK.
The California Assembly approved sales tax exemptions for diapers and menstrual products in 2016, but they were vetoed by then Governor Jerry Brown. He reasoned that since tax breaks “are the same as new spending … they must be considered during budget deliberations.”
Governor Gavin Newsom is heeding that advice. His revised budget proposal for 2019–20 includes a sales tax exemption for diapers and menstrual products. If it takes effect on January 1, 2020, as proposed, the General Fund will be reduced by $17.5 million in 2019–20 and $35 million in subsequent years.
States that already exempt diapers or tampons, etc.
In addition to the five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) with no general sales tax, diapers are exempt from sales tax in the following states: Connecticut, Maryland (adult only), Massachusetts, Minnesota, New Jersey, New York (local tax may apply), Pennsylvania, Rhode Island, and Vermont.
Tampons are currently exempt from sales tax in Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, and Washington, D.C.
States that may soon exempt diapers and tampons
Lawmakers throughout the U.S. regularly introduce sales tax exemptions for these products. Thus, a proposed exemption for menstrual products is making its way through the Maine Legislature (LD286), and a bill that would exempt diapers and feminine hygiene products is still live in Louisiana (SB4 and SB5). There’s been no movement on Georgia’s proposed sales tax exemption for certain menstrual products (HB 8) since January.
All this uncertainty is one reason sales tax compliance is so challenging. Businesses that sell these products throughout the country and are required to collect sales tax in multiple states have to track these changes while complying with existing laws. Sales tax automation software can help.