Sales Tax Slice: Taxing Issues Blow in with Winter Storm Stella

groceries snow

If you thought an unexpected snow day in March was the only consequence of Winter Storm Stella, think again. Even though the nor’easter, which hit the Mid-Atlantic and Northeast on Tuesday after pummeling the Midwest, did not impact major cities as severely as initially expected, the storm has proven to be a major economic disruption. Despite the news that Stella created a temporary downturn in retail sales, many taxpayers might be left with the impression that their pocketbooks are a little lighter than they would have been otherwise, due to the flurry* of pre- and post- snowstorm activities. Sales tax exemptions for services and supplies associated with emergency preparedness can have a considerable impact on how much of a pinch individuals and businesses are feeling in the aftermath of a major storm.

Many Americans choose to stock up on basic groceries like bread and milk prior to a winter storm, and this was certainly true for Stella. (The shelves in one store were picked clean of all its baked goods, with the exception of a solitary loaf of raisin bread, to the delight of the internet.) These staple items are tax-exempt in the majority of affected states, but residents of Illinois and Virginia paid sales tax on their French toast supplies, although at a reduced rate.

Taxpayers are out of luck for other common storm preparedness purchases like snow shovels and ice melt, as the items are almost universally taxed in states imposing a sales tax. Virginia residents who planed ahead may have saved on some emergency supplies during their sales tax holiday last August. Though the holiday focuses on items purchased for hurricane season, products like backup generators, flashlights and weather radios are certainly useful during a snowstorm as well. Other states hit by Stella do not have similar tax holidays for emergency preparedness, although severe weather tax holidays are more popular in southern states commonly affected by hurricanes, such as Alabama, Florida and Texas.

Now that the storm has passed, the focus has shifted to digging out and rebuilding. Some people may be excited to discover that they don’t have to deal with snow removal by themselves, as a new service dubbed the “‘Uber of Snowplowing’” has hit certain markets, promising the painless clearing of driveways and parking lots. Though the rest of us may have to summon help the old-fashioned way (for example, by overpaying the neighbor’s teenage son), in a few states that help will come at an extra cost. Several states impose sales taxes on charges for snow removal and snow plowing, including Connecticut, D.C., New Jersey, New York, Ohio, South Dakota, and West Virginia. Texas, New Mexico and Arkansas tax snow removal as well, although residents of those states were not affected this time around. Charges for the removal of trees and tree limbs damaged during the storm will be subject to tax in Connecticut, D.C., New York, New Jersey, Iowa, Minnesota, and West Virginia, among others. In the majority of states, however, snow removal and tree clearing are not currently enumerated as taxable services.

In the areas hit the hardest by Stella, some authorities are considering issuing disaster declarations in advance of the major rebuilding and clean-up work that will be necessary. Taxpayers will be happy to know that an increasing number of states have passed legislation to provide tax relief for disaster recovery efforts. These statutes, enacted in Iowa, Virginia, Vermont, and Maryland (to name a few), generally allow for exemptions for out-of-state businesses and property that enter a state for disaster-relief activities. Often, states will also refrain from imposing nexus requirements (like sales tax registration and collection) on businesses who are only temporarily physically present in a state for disaster-relief purposes.

As similar severe weather events become increasingly common, perhaps more states will begin to specifically adapt their tax laws to address the supplies and services necessary to make it through the storm.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Are sales tax exemptions for severe weather purchases a good idea?

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*pun very much intended