Sales Tax Slice: Across the States, Diaper Tax Exemptions Still in Their Infancy


Baby

As Mother’s Day approaches, let’s give some thought to all those parents out there who dutifully buy diapers for their wee ones. Despite the fact that diapers, disposable or otherwise, are an essential part of parenting, states have had a difficult time determining whether diapers should be taxable and even how to define diapers.

In fact, states often have complex rules regarding diapers. In Illinois, diapers are taxable at the general rate; many states, such as California, Iowa, Maine, Texas, and Wisconsin, also tax diapers. Other states, such as Massachusetts, New Jersey, New York, Vermont, and Minnesota exempt sales of diapers from sales and use taxes. Connecticut will also exempt diapers effective July 1, 2018. Also, eco-minded parents in Maryland, Minnesota, Wisconsin, and Pennsylvania should note that diaper services are not taxable in those states but are taxable in Texas.

The definitions of diapers also vary significantly across the states, showing the apparent difficulty of defining what I previously thought was a simple necessity. While Wisconsin doesn’t define “diaper,” generally it does define a “cloth diaper” as a “cloth diaper used for sanitary purposes.” Washington, D.C., defines a diaper as “an absorbent incontinence product that is washable or disposable and worn by a person, regardless of age or sex, who cannot control bladder or bowel movements.” In New Jersey, diapers are exempt as “disposable household paper products.”

Until recently, diapers were uniformly considered clothing under the Streamlined Sales and Use Tax Agreement, such that the 23 member states couldn’t exempt diapers without exempting all clothing items. On Oct. 11, 2017, the Streamlined Sales and Use Tax Governing Board provided states with the option to exclude diapers from the definition of clothing. In so doing, the Board defined diapers generally as “an absorbent garment worn by humans who are incapable of, or have difficulty, controlling their bladder or bowel movements,” while providing that states could tax adult and children’s diapers differently. The Board noted that it would have to eventually define the terms children’s diapers and adult diapers separately.

On May 3, 2018, after some internal discussion, the Streamlined Sales and Use Tax Governing Board decided on a somewhat circular definition of children’s diapers that means “diapers marketed to be worn by children.” “Adult diapers” means “diapers other than children’s diapers.”

Whether or how states define diapers, I know that I and many other mothers would certainly appreciate a sales tax exemption for Mother’s Day.

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: How should states define and tax diapers? Should sales tax exemptions apply equally to children’s diapers and adult diapers? 

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