Often, a new year comes with new tax laws — for states as well as at the federal level.
Some states have new sales tax laws coming into effect. Some states have reduced their sales taxes, making purchases a little less expensive. On the other hand, some states have raised sales taxes, and those new rates could impact you at the store.
The Tax Foundation keeps up with state tax changes, including sales tax. Here are some of the sales tax changes you can expect in 2023.
Colorado citizens are likely to see a decrease in the sales tax they pay, thanks to a new exemption on essential hygiene products. Incontinence products, diapers and period products are part of this new exemption at the state sales tax level.
The new law also provides a way for local governments to exclude these products from their own sales tax resolutions.
As with Colorado, Iowa’s new sales tax excludes essential hygiene products. The law in Iowa specifically mentions adult and child diapers, whether they’re disposable or cloth. Previously, diapers were included in sales tax as “clothing,” but the new regulations exclude them from sales tax.
Additionally, feminine hygiene products, including menstrual pads, menstrual cups, tampons, panty liners and sanitary napkins, are excluded from sales tax at the state level.
Most of Maine’s sales tax decrease comes in the form of exemptions for certain truck sales and amendments to existing exemptions for electricity and nonprofit housing.
Maine updated the way it collects sales tax on the sale of a truck or van used for short-term rentals. Now, if the vehicle has a gross weight of less than 26,000 pounds, and it’s used for short-term rentals, the person buying the truck or van for this purpose will be excluded from the definition of “retail sale” and the accompanying tax. Instead, the person renting out the vehicles will collect the sales tax from those who rent them.
Also, Maine expanded a residential electricity sales tax exemption to include those who are in a state-administered low-income housing assistance program. The government also changed its definition of “low income” in relation to nonprofit housing development organizations. The expansion of “low income” has been adjusted to less than 120% of the median income for the area, based on family size.
Some states have been considering cutting sales taxes on groceries in recent years, and Virginia is among those states. In fact, as of Jan. 1, 2023, Virginia got rid of its grocery sales tax entirely. It’s important to note that this elimination of the 1.5% grocery sales tax is at the state level. Localities are still allowed to levy a sales tax of up to 1% on groceries.
Additionally, not all items bought at the store qualify. Alcohol, tobacco, prepared hot foods and seeds are still subject to the tax.
There is also a reduced sales tax rate for certain hygiene items, including diapers, period products, incontinence products and bed sheets.
During 2022, when gas prices soared, New York announced a temporary suspension of sales taxes on gas. Counties also joined in, suspending their own collection of sales taxes on gas and diesel.
Now that 2022 has ended, however, things are back to normal. As a result, some New Yorkers might feel as though this is a tax increase.
Starting in January 2023, Kentucky added a long list of services that would now be eligible for the state sales tax.
First of all, if a newly taxable service saw gross receipts exceeding $6,000 in 2021 or 2022, they had to be registered for the collection of sales and use taxes starting Jan. 1, 2023.
Many of these services are related to side hustles, such as photography, marketing, polling, website hosting, private investigation, massage, personal training and household moving.
Back in 2021, Missouri passed a law designed to begin collecting sales taxes on remote sales into the state. The law took effect on Jan. 1, 2023, and makes Missouri “the final state that collects a state-wide sales tax to pass a law imposing sales tax on remote sales.” This includes remote sellers and marketplaces that facilitate remote sales that see more than $100,000 in annual sales into Missouri.
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