Colorado adopts rules for personal hygiene product tax exemptions
On March 24, 2023, the Colorado Department of Revenue adopted two rules that provide examples for the sales and use tax exemptions for period products, incontinence products and diapers that were created in House Bill 22-1055.
Period products rule
The exemption applies to period products beginning January 1, 2023, as per Section 39-26-717(1)(b.5), C.R.S. The law defines period products as consumer products used to manage menstruation, which primarily absorb or contain menstrual flow.
Qualifying products include tampons, menstrual pads and sanitary napkins, pantiliners, menstrual sponges, menstrual cups, menstrual discs, two-in-one incontinence and period pads, and menstrual underwear designed to hold menstrual flow.
However, to be clear, the exemption does not apply to products that primarily provide pain relief, digital or electronic products used for tracking menstruation or ovulation, home products such as sheets, bed liners or mattress covers, general grooming or hygiene products such as soap, body wash, cleaning solution, shampoo or conditioner, toothpaste, mouthwash, deodorant or antiperspirant, lotion or suntan lotions.
Incontinence products and diapers rule
Similarly, effective January 1, 2023, incontinence products and diapers are exempt, according to Section 39-26-717(1)(a.5), C.R.S. The exemption applies to absorbent cloth or disposable products worn by humans who are incapable of, or have difficulty, controlling their bladder or bowel movements. Examples of qualifying products include but are not limited to cloth diapers, disposable diapers, diaper inserts and liners, two-in-one incontinence and period pads and pads for bladder leaks.
However, the exemption does not apply to clothing, hygiene products such as rash creams, soaps and cleaning solutions or lotions, or home products such as sheets, bed and crib liners or mattress covers.
The exemptions provide tax relief intended to “redress the inequitable burden” on those who use incontinence products and period products. As a result, they will become more accessible and affordable to caregivers, healthcare providers and individuals who purchase them.
Gov. Jared Polis praised the measure which he signed last year. “This new bipartisan law finally ends the sales tax on diapers and feminine hygiene products permanently and starts saving people money on these necessary products,” he said.
Colorado joins at least 10 states that have reduced or eliminated taxes on menstrual products since 2019 to make them more accessible and combat period poverty. The so-called “pink tax” on menstrual products has been eliminated by Minnesota, Illinois, Florida, Maryland, New Jersey, Pennsylvania, New York, Connecticut, Massachusetts and Nevada.
How Wipfli can help
Staying on top of the changing sales and use tax rules can be challenging. Wipfli tax professionals can help you review your tax compliance. Be sure you fully understand your tax obligations to avoid incurring penalties or liabilities. Learn more about our services to help you to mitigate your exposure.
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