Colorado’s New Hygiene Product Sales Tax Exemptions for 2023
Colorado recently enacted legislation to exempt the purchase of certain essential hygiene products from sales tax. The sales tax exemption will officially start on January 1, 2023. Retailers that sell the recently exempted products will need to revise their sales tax collection, reporting, and remittance practices to maintain compliance and avoid penalty assessments from the Colorado Department of Revenue. This change will also apply to out-of-state and online retailers who sell and deliver to customers in Colorado. Implementation of HB 22-1055 could require additional guidance from the Department of Revenue and questions remain about which Colorado cities and towns will adopt this exemption for the purpose of local sales tax. You can learn more about the specifics of the law below.
What Hygiene Products Will Be Exempt from Colorado Sales Tax?
Under HB 22-1055, the following health and hygiene products will be exempt from Colorado state sales tax beginning January 1, 2023:
- Diapers and incontinence products (i.e., absorbent cloth or disposable products).
- Feminine hygiene products (i.e., consumer products for managing menstruation).
An announcement from the Colorado Department of Revenue states it is in the process of updating its sales tax guidance for administering these exemptions. Additionally, the new law allows local taxing jurisdictions within Colorado (i.e., cities and counties) the discretion to adopt the exemptions on diapers and feminine hygiene products or not. This means your business could have sales of products that are exempt under Colorado’s state sales tax but remain taxable in some localities. You will want to confirm if any local sales tax for these items will continue to apply to you by reviewing January’s Colorado Sales and Use Tax Rate Publication (DR 1002).
Colorado Joins Growing List of States with Feminine Hygiene Product Sales Tax Exemptions
With this new law, Colorado joins a growing list of other states that have enacted similar legislation to remove sales tax from feminine hygiene and healthcare products. In 2022 alone, Colorado joins Nebraska, Iowa, and Virginia in removing sales taxes on period products. Other states that have previously exempted feminine hygiene products from state sales tax are:
- New Jersey
- New York
- Rhode Island
If your business sells feminine hygiene products and operates in any of these states, you may want to clarify the applicable rules along with any sales tax obligations you may have.
More Questions About Colorado Sales Tax Exemptions?
Grocery stores, pharmacies, convenience stores, major retailers, and other businesses will all experience changes in their Colorado sales tax because of this new law. We will update this article as additional information becomes available from the Department of Revenue regarding administrating the exemption or related rulemaking. If you have questions about how this exemption might or might not apply to a particular product, please consider a consultation with our sales tax professionals. In addition to consultations on future compliance, we also serve as a resource for businesses facing issues from past reporting. This includes help with Colorado sales tax audits, challenging assessments, and seeking judicial appeals when necessary.