10 rule changes taxpayers need to know in 2016.
Strange But True Tax Laws From All 50 States
10 rule changes taxpayers need to know in 2016.
Alabama has some of the strictest drug laws in the nation, but it also taxes the proceeds from the sale of illegal drugs, such as marijuana, by requiring sellers to have tax stamps -- similar to the excise tax imposed on cigarettes. Anyone caught with large quantities of drugs but no stamps would face not only jail time but also prosecution for tax evasion unless they paid up.
Alaskan whaling captains, as recognized by the Alaska Eskimo Whaling Commission, can deduct up to $10,000 for whaling-related expenses. The deduction is considered a charitable contribution, even if the money isn't paid to a charitable organization. More generally, the state doesn't collect sales or income taxes, but that may change. The recent slide in oil prices has put a strain on the state's budget, prompting lawmakers to mull reinstituting an income tax.
Several states, including Arizona, tax ice blocks and ice cubes differently. Since ice cubes are used in mixed drinks, and considered food, they aren't taxed by the state. Ice blocks, however, are subject to sales tax.
There is plenty of fresh fruit to be found in the Golden State, but there is a 33 percent tax if it is bought from a vending machine. The tax applies to other food items as well, including hot drinks, although there is an exception for vending machines in educational institutions when the items are sold to students.
Think twice before taking a full cup to go while driving down a bumpy road in Colorado. Cups aren't taxed, but lids and straws are. Other nonessentials, such as toothpicks, portion dividers, cup sleeves, and bibs are taxed as well
Delaware is one of five states with no sales tax. The state also has a low 8.7 percent flat tax on corporations, which is probably why more than half of the country's publicly traded companies call the First State home.
In 2014, Georgia became the first state to place a cap on its income tax rate through a ballot measure. The tax rate cap of 6 percent is now part of the state's constitution.
Trees with historic or cultural value, and those that are otherwise deemed worthy of preservation due to their age, rarity, location, size, or aesthetic quality, come with a tax deduction of up to $3,000 a tree in Hawaii. The deduction can be used to cover the cost of maintaining the tree.
In 2014, Idaho changed its statute governing sales tax on cloud computing. The state no longer taxes purchases of cloud-based or downloaded computer software. An early form of the law didn't include cloud-based software that is primarily used for entertainment.
The Hoosier State has several oddball food taxes. For example, marshmallow creme is tax exempt, but marshmallows are not. Icing in tubes and containers of frosting are also exempt, but cake decorations are not.
A use tax is assessed for the use, storage, or consumption of something in a state, regardless where the purchase was made. For example, if a computer is bought while visiting a state that doesn't charge sales tax, the buyer may still need to pay a use tax when returning home. Iowa's tax code includes a strange exemption: Residents don't need to pay a use tax on control units that operate catheters.
Want to ride in a hot air balloon while in Kansas? If it is tethered to the ground, passengers will be taxed for the entertainment. But if the rope is untied, it's treated as air transportation and the ride is tax-free. Wisconsin and Missouri have similar laws.
Home to the world-famous Kentucky Derby, this state has a 6 percent sales tax on thoroughbred stud fees. The revenue, which tops $12 million in some years, is split among three horse breeders incentive funds.
Every September, Louisiana has a Second Amendment sales tax holiday. Hunting supplies, ammunition, and firearms are all exempt from state and local sales taxes, as well as use taxes.
Officially called the Maine Wild Blueberry Tax, this charge amounts to 1.5 cents per pound of wild blueberries sold. Businesses generally pass the tax on to consumers.
Homeowners who are connected to a septic system in Maryland pay a fee of $5 a month, or $60 a year. The money is used to upgrade wastewater treatment plants and failing septic systems, and reduce pollution in the Chesapeake Bay.
Those trying to stay warm during the Minnesota winter should think twice before buying a fur coat. Real fur is subject to sales tax -- 6.875 percent statewide plus local taxes. The tax applies to fur coats bought online, as well. Fake fur, however, isn't taxed.
Individuals and groups of "private nonindustrial landowners" can get a tax credit for up to 50 percent of the costs associated with hardwood and pine reforestation. The credit has a cap of $10,000 a year and a lifetime limit of $75,000.
To encourage young men to marry, Missouri charges an annual tax of $1 to single men between the age of 21 and 50. The law was passed in 1820, when $1 was equivalent to about $20 today.
Residents of Montana can receive a tax credit worth $500 for installing alternative energy equipment such as solar panels, wind turbines, wood stoves, and hydroelectric systems. Another $500 to $1,000 is available to those who convert their vehicles to run on alternative fuels.
Like Alabama, Nebraska taxes the sale of illegal controlled substances. The state's law says drug dealers must purchase Drug Tax Stamps at a rate of $100 an ounce of marijuana, $150 per gram of controlled substances, or $500 per 50-dosage units of controlled substances that aren't generally sold by weight. Stamps can be bought anonymously. Not surprisingly, many people don't comply. The penalty, often added to other criminal charges, ranges from 100 percent of the drug tax plus interest to five years in prison.
Since 1999, the Mr. Olympia bodybuilding competition has been held in Las Vegas. Like everyone else, bodybuilders can deduct ordinary and necessary business expenses. But it's one of the few professions that can count body oil among those expenses.
New Hampshire has neither a sales tax nor an income tax (excluding interest and dividends above $2,400). Instead, many local governments rely on property taxes, which are among the highest in the nation.
Several states, New Jersey included, make a distinction between pumpkins used for food and pumpkins used for decorations. If they are painted, cut, or sold as decorations, pumpkins are taxable.
The year-round warmth of New Mexico draws many retirees, and the state tax rules have an interesting twist for the elderly: Those who are over 100 years old and not claimed as a dependent don't have to pay income tax.
Fortunately, this tax is limited to the city of Durham: Residents' dogs and cats are considered personal property, which allows a tax to be collected. Owners must pay $10 for spayed or neutered pets, $75 otherwise.
There is an extra $3 tax on the sale of white goods, such as air conditioners, dishwashers, and stoves, in North Dakota.
In a battle that went to the Supreme Court, Cleveland's "jock tax" was ruled unconstitutional. The special 2 percent tax is assessed on visiting professional athletes and performers. The city may lose as much as $1 million a year in future revenue, and may have to pay back more than $2 million it collected from NFL players alone.
Most states have property taxes, but Oklahoma is the only one that taxes personal possessions that aren't used to generate income. Even basic household items, such as furniture, are subject to the "tangible personal property" tax.
Oregon allowed the sale of recreational marijuana beginning in October 2015. Starting in 2016, the state imposed a 25 percent tax on those sales. The state sales tax will be 17 percent once retailers licensed by the liquor commission open, likely later this year.
In the city of Johnstown, there is an 18 percent sales tax on alcohol. Taxing alcohol isn't odd, but the tax was created specifically to fund the repair of the city after a flood in 1936. Those repairs were completed in 1942, but the tax remains.
The Rhode Island individual income tax return form (RI-1040) features emoticons. A smiley face appears on the "Amount Overpaid" (refund) line, while a frowny face is shown on the "Total Amount Due" line.
There is a potential upside to hitting a deer while driving in South Carolina. Motorists can receive a $50 tax credit for donating a carcass to charitable organization. Some strict limits apply, however. To be eligible, the deer must be prepared by a licensed meat packer, butcher, or processing plant.
The bad news: South Dakota doesn't give tax breaks for contributions to in-state 529 college savings plans. The good news: It's because the state doesn't have an income tax.
Foods that aren't prepared by the seller come with a 5 percent state sales tax. This includes baby food, dips, and some spreads. However, livestock feed is exempt from sales and use taxes.
Holiday greenery, such as wreaths, mistletoe, and Christmas trees, are all subject to sales tax in Texas, but not when they are bought from a charitable organization. Another way to lessen holiday taxes is to hire a decorating service and provide your own decorations. If the company supplies them, then both materials and labor are taxable.
Although the rule was appealed all the way to the Utah Supreme Court, there is a 10 percent tax on fees charged by businesses such as strip clubs that have nude or partially nude workers. The tax also applies to food and drink sold by the establishment.
Street performers, keep your wallets handy. In Burlington, Vermont's largest city, the city council may tax "the exhibition of common showmen, circuses, menageries, carnivals, and shows of every kind, and all plays, athletic contests, exhibitions or entertainments for money."
Like many states, Virginia has an annual back-to-school tax holiday weekend. But Virginia includes an odd array of items on its list of tax-free goods: fur coats, lingerie, garters and garter belts, wedding apparel, flip-flops, aprons, and corsets, to name a few. To be eligible, the items must have a sale price of $100 or less.
Trying to help the environment and save money by driving an electric car? In Washington state it will cost you. Electric-car owners there pay a $100 annual fee. The money is used to help improve highways and roads, an expense usually covered by revenue from the tax on gasoline.
West Virginia charges businesses a $15 fee to sell sparklers and novelty items such as snakes, glowworms, party poppers, snappers, and "other sparkling devices which emit showers of sparks." Maybe the preferred way to celebrate the Fourth of July is large explosives? (Just kidding, big fireworks are illegal in West Virginia.)
Wisconsin is one of just a few states that taxes Internet access. That's illegal according to federal law, but Wisconsin secured a grandfather exemption and can continue the tax through 2020. The amount varies depending on the type of service -- dial-up, DSL, cable, etc.
As of April 15, 2014, charges for tools lost down holes (as in oil and gas wells) are no longer subject to sales tax. Now, as long as the tool is lost or damaged beyond repair during the "pre-production casing phase" of building an oil or gas well, there is no sales tax when the customer is charged for the tool.<