Ohio exempts diapers for children, expands tax-free weekend

Diapers for children and several other children’s products will be tax free in Ohio effective October 1, 2023. Diapers for adults will remain subject to Ohio sales tax, except during Ohio’s annual sales tax holiday, which will be broadened (and possibly lengthened) in 2024.

House Bill 33 establishes a permanent sales tax exemption for the following products:

Car seats
Children’s diapers
Cribs
Therapeutic or preventative creams and wipes marketed primarily for use on the skin of children (e.g., diaper creams and baby wipes)
Strollers (for infants to children “about thirty-six months of age”)

The bill also provides an exemption for “the fee imposed by section 3743.22 of the Revised Code,” otherwise known as the consumer-grade fireworks fee. For the exemption to apply, the fireworks fee must be “separately stated on the invoice, bill of sale, or similar document given by the vendor to the consumer for a retail sale made in this state.” All the above sales tax exemptions take effect October 1, 2023.

Ohio to broaden and perhaps lengthen its annual tax-free weekend

Another provision in House Bill 33 broadens the items eligible for the state’s annual back-to-school sales tax holiday, which currently runs the first Friday, Saturday, and Sunday of August each year.

Starting in 2024, the temporary sales tax exemption will apply to any item of tangible personal property that has a retail sales price of $500 or less, except alcoholic beverages, marijuana products, tobacco and vapor products, motor vehicles, and watercraft or outboard motors required to be titled. This is significantly more than the exemption provided under Ohio’s current back-to-school tax free weekend, which applies only to certain clothing priced $75 or less, and school supplies or school instructional materials priced $20 or less.

Ohio may also lengthen its annual sales tax holiday in 2024 and subsequent years, but it can only do so if there are sufficient funds in a newly created Expanded Sales Tax Holiday fund. If the sales tax holiday fund contains at least $60 million by a certain date, the Tax Commissioner and the Director of the Office of Budget and Management must consult with the County Commissioners’ Association of Ohio to determine the length of the sales tax holiday.

“It’s unusual for a commissioner to have the authority to set the length of a sales tax holiday,” says Scott Peterson, VP of Government Relations at Avalara. Sales tax holidays are usually established by the legislature.

For 2024 and beyond, the Ohio sales tax holiday would be at least three days and “may include additional days if the commissioner and director determine that the balance in the expanded sales tax holiday fund is sufficient.” If there’s not enough money in the fund to extend the sales tax holiday, the tax-free weekend will be the first Friday, Saturday, and Sunday of August, as it is now.

If there is enough money in the new expanded sales tax holiday fund to lengthen the tax-free weekend, the extra consecutive days could be either before the first Friday of August or after the first Sunday of August. Either way, the commissioner must notify vendors of the dates of the sales tax holiday “not later than the first day of June” preceding the holiday.

Such advance notice is a requirement of the Streamlined Sales and Use Tax Agreement (SSUTA, or simply SST), a program created to reduce the burden and expense of sales tax compliance. As a member of SST, Ohio must provide at least 30 days’ notice of any sales tax rate change — including a change to a sales tax holiday.

The Ohio Legislature originally sought to expand the annual Ohio sales tax holiday to at least 14 days in 2024, but the 14-day tax-free period was vetoed and removed from the bill. “The DeWine-Husted Administration supports the expanded sales tax holiday to provide tax relief to all Ohioans,” explained the veto message, but was concerned that “the revenue loss that will result cannot be estimated.”

The Ohio Executive predicts these new sales tax exemptions will reduce the state’s general revenue fund by approximately $10.7 million in fiscal year 2024 and by $16 million in fiscal year 2025. Certain county and transit authority tax collections will also decline.

What do retailers need to know about Ohio’s expanded sales tax holiday?

For now, it’s enough to know that more products will qualify for the 2024 Ohio sales tax holiday, and that Ohio will lengthen the tax-free weekend in 2024 if it has enough revenue to do so. We likely won’t know exactly what the 2024 Ohio sales tax holiday looks like until sometime around June 1, 2024.

Ohio isn’t the only state tweaking and expanding its traditional sales tax holidays. Florida has gone sales tax holiday happy in recent years, temporarily exempting a panoply of products including fishing bait, pet food, pools, and tools. Illinois suspended its grocery tax for a year, and for one weekend this fall, Nevada will exempt tangible personal property sold to qualifying members of the Nevada National Guard.

Sales tax holidays are especially hard on remote retailers required to collect and remit sales tax in numerous states. During the height of the back-to-school tax-free-weekend season, for example, online sellers may need to comply with five or more concurrent tax-free weekends, each with its own set of rules and requirements. It’s enough to make any retailer dread the impending new school year.

Tax-free weekends can also be an administrative and compliance burden for brick-and-mortar stores that don’t sell out of state: Some states have been known to enact a new sales tax holiday mere days before it takes effect (like Florida and Massachusetts).

Find more information about tax-free weekends in our 2023 sales tax holidays blog. If you’re tired of dealing with sales tax holidays yourself, learn how automating sales tax compliance can help.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.