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Crazy Sales Tax Rules You Won't Believe

  • Learn
  • July 5, 2015 | Laura McCamy

If you collect sales taxes in more than one state or jurisdiction, you already know that local sales tax rates can vary greatly. You may not realize that the rules on what is taxed may also change from state to state, sometimes in inexplicable ways.

If you sell one of the items below, beware the crazy sales tax rules that different states may impose!

Candy-coated Sales Taxes

Most states exempt food from sales taxes (and those that do tax food items impose a lower tax rate on this necessity), but many states do charge sales taxes on candy. While the motivation may be noble--Eat less candy, kids!--the definition of what is taxable candy is sometimes less than straightforward.

For example, in six states, there is no tax on sweets that contain flour. You’ll pay a tax on your Hershey’s kisses, but you can crunch on malted milk balls tax-free. In Wisconsin, marshmallows are tax-exempt unless they are made with flour--just call them marshmallow purists.

Sexy Sales Taxes

This year, Nevada added a tax on escort services, though brothels remain exempt from the state’s live entertainment tax. You might expect this from the only state in which prostitution is legal. What’s more surprising is that neighboring Utah also levies an extra tax on venues that include “nude or partially nude” performers. The wages of sin are, apparently, an extra ten percent sales tax.

Taxing Fun

Speaking of Nevada, the state’s recently modified entertainment tax closed two other loopholes: the artsy Burning Man festival held annually in the Black Rock Desert and the Electric Daisy Carnival, a Las Vegas festival of music and light. Both events, which draw 50,000 and 400,000 attendees, respectively, will now have to charge sales tax on top of ticket prices of around $400.

Taxing Fur

If you live in Minnesota and you want a big, fluffy coat to keep you warm during the winter, your best bet is fake fur, which, like other clothing in the state, is not subject to sales tax. When you buy a real fur coat, the seller owes the state a 6.5 percent sales tax on not only garment but also shipping. Animal skin without the fur (aka leather) is not subject to sales tax in Minnesota.

Sales Taxes Close to the Skin

If you are a fan of body ink or piercings, your Arkansas tattoo or navel ring will cost you an extra six percent sales tax. New York City also taxes tattoos. New Jersey adds a sales tax not only to tattoos but also to tanning services. (Snooki and Pauly D, we feel your pain!) As states expand taxes on services, more will add services such as tattoos and tanning to their roster of taxable items. So plan to pay a bit extra for that “Don’t Tread on Me” tattoo.

There’s a Hole in the Middle of This Tax

It’s simple. You go to your favorite New York City bagel shop (the Bagel Hole in Park Slope, Brooklyn, natch), you order a bagel with cream cheese. They slice it and put cream cheese on it, they charge you sales tax. If you get a plain bagel and you eat it in the shop, still you pay the sales tax. If you leave the shop with the whole bagel in your bag, there’s no tax, even if you snarf it on your way to the subway. Got it? Good.

Fizzy Sales Tax

Mayor Michael Bloomberg couldn’t sell a soda tax to New Yorkers, but the citizens of Berkeley, California, recently approved the nation’s first tax meant to discourage consumption of sugar-laden sodas. The extra sales tax on soda raised more than $100,000 in its first month, which is a good thing (money for kids’ health) or a bad thing (all the sodas consumed to generate that revenue), or maybe both.


Avalara Author
Laura McCamy
Avalara Author Laura McCamy