5 States That Just Lowered Sales Taxes — and 1 That Raised Them

Happy new (fiscal) year! Well, maybe not for the tax man.

July 1 marked the start of a new fiscal year in the vast majority of U.S. states. That’s when new tax policies usually kick in and, in at least a small handful of states, those include lower sales taxes.

Here’s a look at where consumers will save a little more starting this month — and one state where they’ll pay a little more.

New Mexico

For the first time in more than 40 years, New Mexico has lowered its sales tax rate. On July 1, it fell by one-eighth of a percentage point — from 5.125% to a new rate of 5% — and the state plans to cut it by another one-eighth of a percentage point in 2023, according to the Albuquerque Journal.

Each of these two cuts will keep an estimated $94 million in consumers’ pockets.

Maryland

Unlike New Mexico, Maryland isn’t lowering its overall sales tax rate — but it is making more things exempt from sales tax.

According to WBAL-TV, fresh exemptions include:

• Baby products including diapers and baby wipes
• Medical devices such as certain blood pressure monitors and pulse oximeters
• Diabetic care products
• Oral hygiene products

The bad news: Maryland’s taxes on gasoline increased on July 1, as we detail in “7 States That Just Raised Their Gas Taxes.”

Louisiana

Louisiana already exempted drugs prescribed by physicians and dentists from sales tax at the state level. But as of July 1, drugs for the treatment of certain conditions, from migraines to dementia, are exempt at the local level, too.

Illinois

This should come as a relief to anybody in Illinois who eats food: The state on July 1 began a 12-month-long sales tax holiday on groceries, meaning that groceries will not be subject to sales taxes during that time.

A scheduled statewide tax increase on gasoline was also postponed, although several counties went ahead with increases to their gas taxes, as we detail in “7 States That Just Raised Their Gas Taxes.”

Florida

A recent legislative package in Florida provided for several sales tax holidays, including the following extended holidays that started July 1:

• Diapers and baby and toddler clothing (for one year)
• Energy Star appliances (for one year)
• Hurricane-proofing home upgrades such as impact-resistant doors, windows and garage doors (for two years)

You can read the details about these and other sales tax holidays at the Florida Department of Revenue’s “​Tax Holidays and Exemption Periods​” page.

Colorado

Colorado created a new “retail delivery fee” that took effect on July 1 and, according to the Tax Foundation, functions like a tax.

This 27-cent fee generally applies to deliveries that are mailed, shipped or otherwise made by motor vehicle, including orders from online retailers and marketplaces.

On the bright (or at least dim) side, the fee is per order, not per individual item purchased.