January 8, 2015

The Most Tax-Friendly States for New Year's Resolutions

Thomson Reuters analyzes the most tax-friendly states for fitness, healthy eating and more reading

NEW YORK – The Tax & Accounting business of Thomson Reuters has released a list of popular New Year's resolutions and their associated sales tax across the country.

The list shows that more states are now taxing previously exempt services.

Michigan, Maryland, Massachusetts, California, Nevada, Rhode Island and South Carolina top the list of the most tax-friendly states for New Year's resolutions, as they don't levy any sales tax on groceries, e-books or gym memberships. 

The attached map further outlines the breakdown for taxes on these popular resolutions in each state.

Cook more, eat better
Those seeking healthier eating habits in 2015 may be the happiest resolutioners, as almost two-thirds of states do not levy taxes on food items. The tricky thing with food is determining what is classified as food versus non-food or prepared food items, which impacts taxability.

  • If you are looking for fresh fruits and vegetables and lean meats – most states exempt the sale of food and if they tax it, it is frequently at a reduced rate.
  • Virginia, Missouri and Illinois are not the ideal places for food aficionados on a tight budget as they are among one-third of states with a tax levy on food, though at a lower rate than other goods.
  • Alabama and Mississippi are no-go zones as they impose regular rates on food, with no tax concessions. 
  • Hawaii and Oklahoma have regular food tax rates but offer tax credits for those with limited incomes. 
  • If you are in a state that taxes groceries but exempts certain items designated "healthy" make sure your pre-made juices meet the percentages of juice required to be exempt. New Yorkers' juice must contain more than 70% of fruit juice to be tax exempt. 

Sweat it out
It will cost more to renew or apply for new membership in 2015 as 60 percent of states nationwide are imposing sales tax on health clubs.

  • In D.C., gym members who have been paying $100 monthly fees will pony up nearly $70 more in 2015 to comply with the state's new 5.75 percent tax on gym memberships.   
  • Some states like New Jersey exempt nonprofit gym facilities from paying tax.
  • In New York, the only tax-exempt athletic clubs are those that cost a membership fee of less than $10 per year. 
  • In D.C., the debate continues regarding whether yoga is a spiritual activity or true exercise.   

Less (TV) screen time; bury your nose in a (digital) book
If you are looking to expand your knowledge in 2015, then books may be part of your plan. The taxability of old-fashioned paper books is pretty straight forward, but the taxation of electronic books is where it gets interesting.

  • Just over half of states tax digital goods just like the old-fashioned kind. 
  • While printed books are subject to states sales tax, click-happy readers from more than 40 percent of states -- including Michigan, Massachusetts, and Kansas -- will still access tax-free digital books.
  • More states are considering imposing sales tax on digital content using either existing sales tax laws or by enacting specific laws. 

ONESOURCE Indirect Tax is used by leading global companies to seamlessly and accurately comply with sales, use, VAT, and GST regulations. For more information, visit https://tax.thomsonreuters.com/products/brands/onesource/indirect-tax.

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Lisa Travnik 
Public Relations
Tel: +1 201 536 4357
Email: lisa.travnik@thomsonreuters.com