Spring is in the air and we’re all ready to step outside of our virtual offices and into the sunshine. We’re lacing up our tennis shoes and getting outdoors to get moving. Here at TaxJar we like to kick off the sunny season with our Step Challenge. What’s the Step Challenge? We’re so glad you asked!
Each Spring, the TaxJar team opens up a Step Challenge to the entire company. It’s pretty straightforward – complete the daily challenge by walking a certain amount of steps in a workday for 15 days. Of course there’s a prize involved — we can be competitive over here so it’s a little extra incentive to keep us moving outside. Or inside – hello Spring showers!
And of course, we’re sales tax people over here. So all this talk of fitness and health got us thinking about sales tax. How are these items taxed when it comes to sales tax?
Are fitness items taxable? Usually.
While working on your fitness is good for your body and mind, you won’t find any relief when it comes to sales tax.
However, this is sales tax we’re talking about, so there are some exceptions. In the state of New York for example, cardiovascular, strength-training, and other fitness equipment and accessories are exempt from sales tax when prescribed by a physician. There are some restrictions around that qualification, you can read more about those here.
As far as fitness apparel goes, you are most likely paying and charging sales tax there as well. In most states, clothing is subject to sales tax. There are (of course!) some exceptions, and currently seven states that do not require you to charge sales tax on clothing in most cases. We’ve got a great resource for you on that here.
What about health products like medicine and supplements?
The good news is that in most states, prescription medicine is exempt from sales tax. Illinois and Louisiana have some limitations to that exemption, you can read about those here. When it comes to nonprescription medication, most states consider it to be taxable.
Things get a little tricky when it comes to supplements. Some states consider supplements grocery items because they often have “nutrition facts” labels rather than “supplement facts” or “drug facts” labels.
Other states lump dietary supplements in with other generic “tangible personal property” and consider them to be fully taxable.
And still other states make a distinction between prescription and nonprescription dietary supplements when it comes to sales tax. For example, Alabama considers dietary supplements non-taxable but only if they are prescribed by a licensed medical practitioner.
Last but not least, dietary supplements are not always pills. They can come in the form of powders or even bars. When selling a product, determine if it makes claims such as alleviating a vitamin deficiency. If it does, it may look like a food bar, but actually be taxed as a supplement. If your head is spinning, we have a state-by-state list of where supplements are subject to sales tax.
How do you get sales tax compliant when selling health and fitness products?
Here’s what you need to do to make sure you’re collecting and filing sales tax the way the states want you to:
- Determine where you have sales tax nexus and register in those states. To stay on top of where you have liability and therefore have to collect and remit taxes, you’ll need to understand where you have or are approaching economic nexus thresholds.
- Charge the correct rates. Establish rate tables and do your product taxability research, understand jurisdictional boundaries and where those rates apply, and keep up with any changes.
- Aggregate your sales channels in one place. Make sure you’re compiling sales data from every sales channel and be aware of marketplace facilitator laws by state to properly collect and remit taxes.
- File your returns. In the states where you’re registered, be sure to know your due dates, submit your returns and remit any payments necessary.
How TaxJar Can Help
Whether you sell treadmills, fitness apparel, or vitamin supplements, managing sales tax should be the last thing you’re worrying about. TaxJar can help manage your sales tax compliance. We support fitness and health transactions within our product. Learn more about how we can help your growing health and fitness company.