Celebrating independence with state-specific sales taxes – Wacky Tax Wednesday

One of the things I appreciate most about the United States is that it’s somehow managed to stay together despite the strong personalities and differing values of each individual state. Unity was tenuous at the outset: The colonies were more interested in asserting independence from Britain than forging that “perfect union” later referenced in the preamble to the U.S. Constitution. Some days it still seems awfully fragile.

Tremendous differences between the states endure, and one of the most entertaining aspects of my job is discovering how those differences play out with respect to sales tax. 

For example, would lawmakers in any state other than Texas propose a sales tax exemption for beer or ale sold on the Fourth of July? Perhaps. Yet, somehow, I wasn’t surprised to see it come out of the Lone Star State.

Though Texans won’t be quaffing tax-free beer tomorrow, they can celebrate the holiday with fireworks. It’s legal to sell fireworks statewide in Texas June 24–July 4, in honor of Independence Day, and December 20–January 1, in honor of the new year. Certain counties also allow periodic sales of fireworks in honor of other special occasions, such as Texas Independence Day.

Fireworks used to be subject to an extra 2 percent tax in Texas, on top of other applicable state and local sales and use taxes. However, the surtax was repealed in 2015. It was supposed to raise money for rural fire departments (so they could fight fires started by fireworks?), but the revenue collected didn’t cover the costs of administering the tax.

Like fireworks, sales of American flags usually increase leading up to the Fourth of July. American flags are generally exempt from sales tax in approximately 10 states, including six of the original 13 colonies: Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, and Rhode Island (they’re also exempt in another original colony, New Hampshire, because the state has no general sales tax).

Several other states provide an exemption for American flags sold under certain circumstances. For example, veterans’ organizations can sell them free of tax in California and Vermont. A few years back, a sales tax exemption for American flags “made entirely of cloth or similar material” was proposed in Maine, but it died. 

American flags often fly proudly above stadiums and other large event venues. So I was interested to learn recently that in Connecticut, the tax on admissions can vary by venue. As of July 1, 2019, the rate is 5 percent for events held at Dunkin’ Donuts Parks but 7.5 percent for events held at several other venues, including Dodd Stadium and the Harbor Yard Amphitheater.

Even parking for events, etc., is increasingly likely to be taxed in “the land of the free.” Starting January 1, 2020, metered and other previously exempt parking will become taxable in Connecticut. The Constitution State implemented a tax on motor vehicle parking in non-metered seasonal parking lots and hospital parking garages with at least 30 spaces back in 2015. Are charges to park in a hospital parking garage with fewer than 30 spaces now taxed under the new law?

In Illinois, “a tax is imposed on the privilege of using in this State a parking space in a parking area or garage for the use of parking one or more motor vehicles, recreational vehicles, or other self-propelled vehicles” as of January 1, 2020. Rates are based not on the type or size of vehicle but on frequency of parking:

• 6 percent of the purchase price for parking paid for on an hourly, daily, or weekly basis
• 9 percent of the purchase price for parking paid for on a monthly or annual basis

Finally, I can’t think of the Fourth without thinking of parades, and my favorite part of parades is the old cars. (I used to live in a town where the July 4th parade featured a dance of VW camper vans. It was awesome; but I digress.) Louisiana recently enacted a sales and use tax exemption for certain antique motor vehicles — the kind often featured in parades. Yet these cars still bring revenue to the state: There’s now a $1,000 fee for issuing special license plates for antique motor vehicles that qualify for the sales and use tax exemption.

As you celebrate the Fourth of July with family and friends, take a minute to think about taxes. After all, a desire to avoid taxation without representation was one of the main motivations for American independence. Look how far we’ve come.

We all have to pay sales tax, but at least businesses can use sales tax software to facilitate sales tax compliance. Learn more.