Infant Supplies and Sales Tax
- Sales Tax
- June 10, 2016 | Bethany McDonald
With about 4 million babies born in the US each year, the infant supplies industry is booming. These products generate more than $23 billion in revenue, of which $5 billion represents sales through online channels.
Parents, especially Millennials, are more interested than ever in convenient and affordable shopping solutions, making buying infant supplies online -- especially recurring purchases like diapers, wipes, and formula -- a no-brainer. However, if you’re an ecommerce retailer of infant supplies -- whether it be cribs, mashed bananas, or onesies -- determining which products are exempt from sales tax in each state can be confusing.
Do I Tax That Teething Ring?
Certain infant supplies, such as baby food, diapers, formula, breast pumps, and clothing are exempt from sales tax in certain states, while taxable in others. If a state offers general exemptions on clothing, infant apparel is likely exempt as well. Some states consider diapers as “clothing,” and exempt tax from the sales of such goods.
Similarly, if a state exempts the sales of food for home consumption, it’s likely that baby food and formula is exempt as well. Furthermore, in a few states, certain infant items such as supplements and baby oil, fall under the definition of medical supplies, and are thus exempt from sales tax. For example, in Texas and New York, baby care products such as oils, lotions, and powders, as well as baby clothing, are taxable, while baby food and formula are exempt from sales tax.
In Massachusetts, however, baby oil, formula, clothing, buntings, bibs, rubber pants, and receiving blankets are exempt from sales tax, while baby lotions and powders, as well as car seats, cribs, teething items, and wipes are taxable.
Duty on Diapers
When people think of baby supplies, they immediately think diapers. Whether reusable or disposable, diapers represent a necessary ongoing expense for parents for at least two years, with the costs ranging from $500 to more than $1,100 per year for one baby. As such, diapers represent a huge business for online retailers, particularly those that offer discounts or bulk purchases.
Diapers are exempt from sales tax in several states, including Massachusetts, Pennsylvania, New York, and Rhode Island, as they fall into certain definitions of already-exempt items, such as clothing or medical supplies. However, diapers are considered taxable in several other states, including Florida, Texas, California, and Colorado.
A breast pump is another necessary purchase for many new mothers. These devices are considered medical equipment in many states, such as New York, and are exempt from sales tax whether purchased with a prescription or not. In other states, such as Texas and Massachusetts, these items are exempt if purchased with a prescription, but are taxable if purchased without a prescription. In California and Pennsylvania, breast pumps are considered taxable whether purchased with a prescription or not.
As an ecommerce retailer, it’s important to understand the tax regulations in each state in which you maintain nexus in order to collect the appropriate amount of sales tax from your customers. If you’re unsure whether or not an infant supply items should be taxed, read through each state’s sales tax exemptions list, or contact each state’s department of revenue for more information.