Sales Tax Slice: Sand, Surf, and Sunscreen



As we approach Memorial Day, and the summer season of beach vacations, cookouts, and water parks, health experts hope that you will increase your purchases of one particular item—sunscreen. And with Hawaii’s recent ban on certain sunscreen ingredients to prevent coral bleaching, sunscreen has been a hot topic in the news lately. So here at Bloomberg Tax, we thought it was worth investigating how much sales tax we are all paying on this essential purchase.

A few states completely exempt purchases of sunscreen. This is because sunscreen is labeled as a drug, following Food and Drug Administration guidance. These jurisdictions exempt sales of over-the-counter drugs, and thus exempt sales of sunscreen as well. This is true in the District of Columbia, New York, and Texas.

However, some states that provide exemptions for over-the-counter medications specifically exclude sunscreen from this exemption. For example, Minnesota exempts all sales of over-the-counter drugs, but specifically states that sunscreen is taxable, regardless of whether the packaging includes a “Drug Facts” label or a statement of active ingredients. Florida and Connecticut likewise exempt sales of over-the-counter drugs, but apply sales tax to sales of sunscreen. Similarly, Illinois provides a reduced, 1-percent sales tax rate for sales of certain nonprescription medications. Sales of sunscreen do not qualify and are taxed at the full rate.

In Hawaii, the new rules on sunscreen ingredients do not affect the taxability of the finished product. There you will pay sales tax on all purchases of sunscreen, regardless of which active ingredients are used, and all purchases of over-the-counter drugs as well.

Regardless of whether your wallet hurts from shelling out money for sales tax on sunscreen, avoid getting burned this weekend!

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: Should sales of sunscreen be exempt from tax? Should states treat sunscreen as an over-the-counter drug for tax purposes?

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