The Tax and Accounting business of Thomson Reuters has released a list of states whose tax codes make it easiest for people to keep their New Year’s resolutions.
The company found that Michigan, Maryland, Massachusetts, California, Nevada, Rhode Island and South Carolina are the friendliest states for resolution makers, thanks to the absence of sales taxes on groceries, e-books and gym memberships.
However, the list also shows that more states are now taxing some services that had been previously tax exempt.
Those seeking healthier eating habits in 2015 may be the happiest New Year’s resolvers, as nearly two-thirds of states do not levy taxes on food items. However, the tricky aspect of food (besides all those calories) is determining what is classified as food versus non-food or prepared food items, which affects their taxability, not to mention edibility.
If you are looking for fresh fruits and vegetables and lean meats, you’re probably a lot healthier than most people. Also, the good news is that most states exempt the sale of those types of foods, and if they tax it, it is frequently at a reduced rate.
Virginia, Missouri and Illinois are not exactly the ideal places for food aficionados on a tight budget (at least according to the folks who compiled the list) 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” for those allergic to taxes as they impose regular tax rates on food, with no tax concessions.
Hawaii and Oklahoma have regular food tax rates but offer tax credits for those with limited incomes (Hawaiian Punch, anyone?).
If you are in a state that taxes groceries but exempts certain items designated as “healthy” (and what isn’t designated that way these days?), Thomson Reuters advices that you make sure your pre-made juices meet the percentages of juice required to be tax exempt. New Yorkers’ juice needs to contain more than 70 percent of fruit juice to be tax exempt—and it doesn’t hurt if it’s Big Apple juice.
Sweating to the Oldies
It will cost more to renew or apply for new gym membership in many states in 2015, as 60 percent of states nationwide are now imposing sales tax on health clubs.
In the District of Columbia, health club 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.
In D.C., the debate continues regarding whether yoga is a spiritual activity or true exercise. With yoga, it always helps to be flexible.
Some states like New Jersey exempt nonprofit gym facilities from paying tax, so it helps if you’re a member of the Y.
In New York, the only tax-exempt athletic clubs are those that cost a membership fee of less than $10 per year. But try to find one of those in New York City!
Books vs. E-books
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 straightforward, Thomson Reuters noted, 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 state sales taxes, click-happy readers from more than 40 percent of states—including Michigan, Massachusetts and Kansas —will still access tax-free digital books. That’s good news for Kindle users.
More states are considering imposing sales tax on digital content using either existing sales tax laws or by enacting specific laws.