July 2026 tax rate changes

• July 1, 2026, brings many state and local tax changes across the U.S. There will be local sales and use tax changes in more than 20 states starting July 1, 2026.
• Several states are changing sales tax exemptions and taxability rules. Nebraska is repealing multiple sales tax exemptions, Virginia’s bullion exemption is scheduled to expire, and Alabama’s temporary state sales tax suspension on groceries ends June 30, 2026.
• New fees, tax holidays, and compliance requirements may affect specific industries. Colorado’s retail delivery fee is increasing, New Mexico is raising its cannabis excise tax, South Dakota is introducing new nicotine product licensing requirements, and several states are holding sales tax holidays in July 2026.

Alabama suspended the state sales and use tax on food and food products intended for home consumption from May 1, 2026, through June 30, 2026. Effective July 1, 2026, Alabama state sales and use tax once again applies to food for home consumption. Local taxes on food were never suspended.

The Colorado retail delivery fee will jump from $0.28 to $0.31 on July 1, 2026. The 31-cent rate will remain in effect through June 2027.

Three counties and 59 municipalities in Illinois will begin imposing a 1% local grocery occupation tax starting July 1, 2026.

The Indiana Department of Revenue is running a tax amnesty program from July 15, 2026, through September 9, 2026. For participating taxpayers who successfully fulfill the terms of the amnesty program, the department will waive all related penalties, interest, and collection fees.

Per the Nebraska Department of Revenue, the following Nebraska sales tax exemptions are repealed effective July 1, 2026, due to the enactment of LB901:

• Biochips
• Game birds subject to permit and regulation by the Game and Parks Commission
• Materials for the manufacture, installation, construction, repair, or replacement of a community-based energy development project
• Mineral oil to be applied to grain as a dust suppressant
• Purchases by certain nonprofit organizations
• Tangible personal property acquired by a person operating a data center

On the other hand, beginning July 1, 2026, a construction contractor purchasing material for a nonprofit entity client may purchase building materials tax exempt based on the buyer-based exemption of the nonprofit entity client. A “buyer-based exemption” is an exemption based on the purchaser of the product.

Virginia’s retail sales and use tax exemption for gold, silver, or platinum bullion or legal tender coins is scheduled to sunset on July 1, 2026. Virginia has extended the exemption several times in the past.

Alabama, Mississippi, New Mexico, Puerto Rico, Tennessee, and West Virginia each have a sales tax holiday in July 2026, and on July 1, 2026, Utah will kick off a gas tax holiday. See our 2026 sales tax holidays blog post for details.

Local tax rate changes take effect July 1, 2026, in the following states. Click on the state links for local tax rate information.

Arizona is updating its motor vehicle waste tire fee.

California is increasing the cigarette and tobacco products retailer license fee and the tobacco products licensing fees. But, the state’s excise tax rate on tobacco products is dropping.

Iowa retail tobacco and device retailer permits expire on June 30, 2026. Anyone intending to continue retail sales of the products covered by these permits must submit a renewal application.

New Mexico is increasing the cannabis excise tax rate.

South Dakota is introducing new licensing and regulatory obligations for anyone distributing nicotine products starting July 1, 2026. It’s also increasing the annual license fee for electric vehicles from $50 to $100 starting July 1, 2026.

Spring Lake Heights Borough, New Jersey, is levying a 3% transient accommodations tax effective July 1, 2026.

And the Vermont telephone personal property tax is repealed effective July 1, 2026.

Santa Cruz, California, will impose an additional graduated real property transfer tax starting July 1, 2026. The tax is based on the property’s sale price, ranging from 0.5% for values between $1.8 million and $2.5 million, to 2% for values over $4.5 million. The maximum tax per transaction is $200,000.

Rhode Island is imposing a new non-owner occupied property tax on residential properties assessed over $1 million starting July 1, 2026.

Austria is reducing the value-added tax (VAT) on certain food staples from 10% to 4.9% effective July 1, 2026.

Staying current with evolving tax rules can be time-consuming and complex, especially for companies selling into multiple states or countries.

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