What: Most states have a sales tax on consumer purchases. Currently, only five states do not: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, state laws vary greatly as to what purchases are exempt from their sales taxes. For many years, sales taxes were not collected on online purchases where the seller lacked a physical presence in the state of the buyer. The buyer was supposed to pay a state use tax, but that was difficult to enforce. Since the US Supreme Court’s decision in Wayfair, however, states generally can require online sellers to collect sales tax on sales into the state. States have also tended to impose sales taxes on tangible consumer purchases rather than services. As states look for revenue sources, their approach is starting to change.
Why: Below are some likely categories of Valentine’s Day gifts this year and the states in which they are subject to sales tax or exemption. This 2021 Valentine’s Day graphic from Wolters Kluwer Tax & Accounting also provides some fast facts and additional information.
- Alcoholic Beverages: Alcoholic Beverages are taxable in all states with a sales tax, except in Kansas and Massachusetts
- Amusement and Recreational Services: Most states only tax services specified by statute. Four states tax all services unless a specific exemption is provided by statue: HI, NM, SD, and WV. Twenty-eight states have specific statutory provisions to tax amusement and recreational services: AL, AZ, AR, CT, FL, GA, ID, IA, KS, KY, LA, MN, MO, MS, NE, NJ, NY, NC, ND, OK, SC, TN, TX, UT, VT, WA, WI, and WY
- Candy: These states generally apply a sales tax for candy: AL, AR, CO, CT, FL, HI, ID, IL, IN, IA, KS, KY, ME, MD, MN, MO, MS, NJ, NY, NC, ND, OK, RI, SD, TN, TX, UT, VA, and WI. Candy is generally exempt from sales tax in AZ, CA, GA, LA, MA, MI, NE, NV, NM, OH, PA, SC, VT, WA, WV, WY, and the District of Columbia
- Dining In or Out: Carry-out or delivery from a restaurant is taxable in all states with a sales tax the same as dining in the restaurant. However, going to the grocery store and preparing your own dinner can save on sales taxes. In addition to the five states without a state sales tax, thirty-two states plus the District of Columbia exempt groceries. Seven states tax groceries at the normal sales tax rate: AL, HI, ID, KS, MS, OK, and SD; while six states tax groceries at a reduced tax rate: AR, IL, MO, TN, UT, and VA
- Floral Arrangements: Floral arrangements are generally taxable in all states except MI, where plants purchased at a business that accepts food stamps are excluded from sales tax. Food producing plants are exempt in CA, FL, MA, NV, TX and WI
- Jewelry: Jewelry purchases are generally taxable in every state that has a sales tax, although Connecticut has a higher rate for purchases over $5,000. New York provides that specialty or jewelry teeth are not exempt prosthetic dental devices and therefore are taxable
Who: Tax expert Carol Kokinis-Graves, JD, Senior State Tax Analyst for Wolters Kluwer Tax & Accounting, is available to discuss the potential state sales tax issues surrounding Valentine’s Day gifts and similar state sales tax issues.
PLEASE NOTE: The content of this alert has been prepared by Wolters Kluwer Tax & Accounting for general informational purposes only. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering legal, accounting, or other professional services.
Contact: To arrange interviews with Carol Kokinis-Graves and other federal or state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.