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The curious case of what does and doesn’t get taxed – Wacky Tax Wednesday


magazines, newstand

The recent talk of federal tax reform has got me thinking about quirky state tax laws. It’s always interesting, to me at least, to see which goods and services states tax, and which they exempt.

Take Pennsylvania, where neckties are exempt but prom dresses are taxable; tax is due on the purchase of a pregnancy test kit if the exempt IUD fails; exempt girdles help brides better fit into their taxable bridal gowns; and baby formula is exempt but pumps that help moms make the homegrown variety are taxable.

Pennsylvania isn’t unusual.

Extra! Extra!

Connecticut provides an exemption for subscriptions to magazines, as well as publications that only contain puzzles. Purchase those same items off the shelf and they’re subject to tax. Tabloids such as the National Enquirer and Star are considered magazines.

On the other hand, sales of newspapers are always exempt. The state defines newspapers as “publications that contain current or recent news and articles of opinion.” They’re further described as: appealing to a wide spectrum of the general public, published at stated intervals, usually printed on newsprint, and routinely reporting on a large number of topics.

There’s one more little twist. According to Connecticut Department of Revenue Services PS 2006(6), “Charges to access magazines or newspapers over the Internet are considered charges for on-line access to information, and are taxable as computer and data processing services at the reduced rate of 1%.”

Pennsylvania also taxes “periodicals and magazines not purchased by subscription” but exempts “periodicals and magazines purchased by subscription.” “Newspapers of general circulation qualified to carry a legal advertisement” are also exempt in The Keystone State.

What a stud

Fees charged for “breeding a stallion to a mare” are subject to Kentucky sales tax. As of June 1, 2005, that tax must be reported on a supplemental sales tax form. Instead of going to the state, the revenue goes to the Kentucky Horse Racing Authority, which uses it “to enhance the breeding industry in Kentucky of thoroughbreds, standardbreds, and other horses.”

Not very sporting

Most clothing is exempt from sales tax in Minnesota, New Jersey, Rhode Island, and Vermont. However, none of these states provide an exemption for recreational or sports equipment, which includes ballet and tap shoes, baseball and boxing gloves, skates and ski boots, and cleated or spiked sports shoes.

Pennsylvania also taxes “clothing normally worn or used when engaged in sports.” In addition, though it exempts many articles of clothing, it taxes “formal day or evening apparel” and “articles made of real, imitation, or synthetic fur where the fur is more than three times the value of the next most valuable component material.” The same tax policy holds true for fur clothing in Minnesota.

More limited exemptions exist in Massachusetts and New York. In Massachusetts, sales tax applies only to clothing with a price of more than $175, and only to the amount over $175. In New York, clothing and footwear with a price of less than $110 are exempt from state and some local sales taxes, while the full cost of items priced above that threshold is taxable.

Connecticut once exempted clothing and footwear costing less than $50. That exemption was repealed, and was then slated to take effect once more as of July 1, 2015. However, it was not restored on that date. Currently, as explained by the Connecticut Department of Revenue Services, “The general sales tax rate of 6.35% applies to most sales of clothing and footwear.” Furthermore, “A tax rate of 7% applies to the sale for more than $1,000 of an article of clothing or footwear intended to be worn on or about the human body, a handbag, luggage, umbrella, wallet, or watch.”

Sales tax holidays can make product taxability even more quirky, if only for a limited period of time. For example, adult and baby diapers remain taxable during Mississippi’s annual sales tax holiday but are exempt during Tennessee’s tax-free period. Tennessee also allows a temporary exemption for galoshes, while Mississippi keeps overshoes taxable.

All these differences can complicate sales and use tax compliance, especially for retailers that do business in multiple states.

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Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.