No Fourth of July celebration is complete without fireworks, and Americans are willing to pay for their colorful displays of patriotism. According to the American Pyrotechnic Association, Americans spent over $1.2 billion on fireworks in 2017, with consumer fireworks accounting for $885 million of that. Some states see this as an attractive source of revenue, and have imposed excise taxes and licensing fees on fireworks sales.
Currently, six states impose statewide excise taxes on fireworks sales, and another two permit excise taxes in select localities. These taxes are imposed on top of each state’s existing 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. , and range from 2 percent in Texas to 12 percent in West Virginia and Pennsylvania.
Pennsylvania’s 12 percent 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. is new this year, and heading into Independence Day weekend, local fireworks dealers are not happy. Pennsylvania instituted the tax and legalized the sale of consumer-grade fireworks to its residents simultaneously, which might seem like a fair trade. However, anyone who has driven across the state’s borders knows that roadside stands have long done a brisk trade selling consumer-grade fireworks to nonresidents. Now these transactions – along with the sale of Roman candles and firecrackers – are subject to a high excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. .
At this point, many shoppers are unaware of the new tax. According to retailers, the tax has disrupted many shoppers’ annual tradition of traveling to Pennsylvania to buy fireworks, with some shoppers even leaving behind full shopping carts to go to another location. Phantom, a major retailer, has begun issuing notices in its magazines encouraging shoppers to drive to Ohio, where there is no added tax.
With the exception of Maryland, all states which permit the sale of fireworks – whether they only legalize sparklers and Pop-Its or permit the sale of 500-gram repeaters with names like “Hypersonic X-Celerator” – charge a retail registration fee, essentially a license for the privilege of selling fireworks. These fees are as varied as fireworks themselves and range from trivial $5 paperwork charges in Coventry, Rhode Island, to $20,000 permits for 15,000-square foot stores in Pennsylvania. These license and permit fees are a hidden cost for consumers.
In some areas, nonprofits sell fireworks as a fundraising activity. Licensing fees can be particularly burdensome for such operations. For example, if a community organization wanted to sell fireworks in Maine to raise revenue, it would have to pay a $5,000 fee, which would be prohibitive for many organizations. By contrast, Guernsey, Wyoming, takes this into account and allows nonprofits to pay a discounted fee of $25.
The following tables shows fireworks excise tax rates in the eight states which currently impose such a tax, and retail license fees for all states. Will your Independence Day celebrations be taxed?
| (a) Tax only in Cleburne County | |
| (b) Tax only in Houston City | |
| Sources: State Departments of Revenue, State Fire Marshals’ offices, State Departments of Labor, State Departments of Agriculture, County Commissioners’ offices, American Pyrotechnics Association | |
| State | Tax Rate |
|---|---|
| Alabama (a) | 8% |
| Alaska (b) | 2% |
| Georgia | 5% |
| Indiana | 5% |
| Michigan | 6% |
| Pennsylvania | 12% |
| Texas | 2% |
| West Virginia | 12% |
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Subscribe| Note: Retail fees shown are for vendors selling the most varied selection of fireworks allowed by state law, in the most permanent establishment allowed by law. | |
| (a) California charges a license fee of $50 on all fireworks, but an additional $750 fee on Pop-Its and snaps | |
| (b) Fee for one stand | |
| (c) Fee for store with majority of floor space dedicated to fireworks | |
| (d) Fee for non-seasonal/permanent license | |
| (e) Fee for resident of state | |
| (f) Maximum fee allowed by state | |
| (g) Fee for store in largest size bracket | |
| (h) Fee determined by inspector at site, ranges from $300 to above $6,000 | |
| Sources: State Departments of Revenue, State Fire Marshals’ offices, State Departments of Labor, State Departments of Agriculture, County Commissioners’ offices, American Pyrotechnics Association | |
| State | Retail Fee |
|---|---|
| Alabama | $240 |
| Alaska | $10 |
| Arizona | Varies by locality |
| Arkansas | $25 |
| California (a) | $750 |
| Colorado | $50 |
| Connecticut | $200 |
| Delaware | $25 |
| Florida | $25 |
| Georgia | $1,500 |
| Hawaii | $500 |
| Idaho | $25 |
| Illinois | $500 |
| Indiana (b) | $276 |
| Iowa (c) | $1,000 |
| Kansas | Varies by locality |
| Kentucky (d) | $500 |
| Louisiana (e) | $100 |
| Maine | $5,000 |
| Maryland | n/a |
| Massachusetts | All firework sales are banned |
| Michigan (d) | $1,000 |
| Minnesota (f) | $350 |
| Mississippi | Varies by locality |
| Missouri | $50 |
| Montana (g) | $1,125 |
| Nebraska | $25 |
| Nevada | Varies by locality |
| New Hampshire | $1,500 |
| New Jersey (h) | $6,000 |
| New Mexico (c) | $750 |
| New York | $250 |
| North Carolina | Varies by locality |
| North Dakota | $20 |
| Ohio | $2,750 |
| Oklahoma | $10 |
| Oregon | $100 |
| Pennsylvania (d) (g) | $20,000 |
| Rhode Island | Varies by locality |
| South Carolina (d) | $200 |
| South Dakota (c) | $1,000 |
| Tennessee (d) | $1,000 |
| Texas | $20 |
| Utah | Varies by locality |
| Vermont (e) | $50 |
| Virginia | Varies by locality |
| Washington | $100 |
| West Virginia | $1,040 |
| Wisconsin (d) | $500 |
| Wyoming | Varies by locality |
| District of Columbia | $248 |