If you haven’t been living under a rock for the last two days, you’ve probably noticed that the internet is losing its mind over the infamous dress that’s seen by some as black and blue and by others as white and gold.
This got us thinking: regardless of how you see the dress, how does your state taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code see it? Check out the map below for how your state treats the purchase of clothing (including that dress) under the state sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. . Is it taxable, or is it exempt?
Click map to enlarge.
Thirty-eight states plus D.C. include clothing purchases in the state sales tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. . Seven states exempt the purchase of clothing in some fashion. A full sales tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax. applies in Minnesota, New Jersey, Pennsylvania, and Vermont. Clothing up to a certain cap is exempted in Massachusetts (up to $175), New York (up to $110 per item), and Rhode Island (up to $250).
The ideal sales tax is one that has a broad base that taxes all final consumer purchases. This type of tax base is ideal because it’s neutral, simple, and stable. A broad base also allows the overall tax rate to be lower than it would be with an otherwise narrow tax base. With that in mind, even we can't explain why some states see this dress as taxable, while others are adamant that it should be exempt.Share