United States

D.C. moves one step closer to eliminating so-called "tampon tax"

TAX BLOG  | 


The District of Columbia has joined the growing movement towards putting an end to the “tampon tax” – a sales tax on tampons and other feminine hygiene products. On Dec. 6, 2016, the District’s Mayor Bowser approved the Feminine Hygiene and Diaper Sales Tax Exemption Amendment Act of 2016, exempting the sale of sanitary napkins, sanitary towels, tampons, menstrual cups, sanitary pads and diapers from the 5.75 percent sales tax. Before the exemptions can take effect, however, the District must first account for the projected $3.3 million per year in lost sales tax revenue in its annual budget.

Advocates of the exemptions had argued that lifting the tax on feminine hygiene products and diapers will have a huge financial impact on low and moderate income women, particularly considering the cost of such products in relation to income. Due to the regressive nature of the sales tax, low income families often contribute a larger percentage of their income to the tax. The exemptions are intended to reduce that burden on District-based families.

A number of states currently exempt feminine hygiene products, including Maryland, Massachusetts, Minnesota, New Jersey, Pennsylvania and Connecticut (beginning June 1, 2018), Illinois (beginning Jan. 1, 2017) and New York (beginning Sept. 1, 2016). The latter three states enacted exemptions on feminine hygiene products in the 2016 calendar year. Five states do not impose a general sales and use tax and therefore also do not subject feminine hygiene products to the tax: Alaska, Delaware, Montana, New Hampshire and Oregon. In 2015, Canada exempted feminine hygiene products from its goods and services tax, a tax similar to a state’s sales and use tax. However, not all exemption efforts have been successful. Recently, California’s Gov. Brown rejected a measure exempting certain hygiene products citing large impacts to state revenues.

Small changes to a state’s sales tax base, like the repeal of a tampon tax, can cause headaches for retailers. Retailers are responsible for accurately accounting for which items are taxable, which are nontaxable and the appropriate rate of tax for each item sold. District retailers should be aware the exemptions have passed and will take effect once accounted for in the District’s budget.  


Brian Kirkell

Principal

Brian provides advanced technical analysis of state and local tax issues important to middle market businesses. Reach him at brian.kirkell@rsmus.com.

Areas of focus: Washington National TaxState and Local TaxOnline and Remote Seller Sales Tax