Sunday, April 5, 2015

10 Strangest Ways That States Tax You (or Don't)

With April 15 just around the corner, paying federal and state income taxes are on everyone's mind.  Many states (actually, most states) have their own annual income tax in addition to the federal income tax. And some of those states have an even more complex tax code than the IRS. All states require enough sources of income to meet their expenses. Those states without an individual income tax make up the loss of income by imposing other obligations on their residents.

All of the states have devised ways of producing extra income to meet their needs.  It goes without saying (although, I'm going to say it) that some of these income producing methods are a bit quirky. But on the other hand, some states have weird tax deductions that favor the tax payer.

Here is a list of 10 strange state tax laws.

1. Hawaii: Exceptional Trees
In order to preserve the uniqueness of their island paradise, Hawaii has had an "Exceptional Tree" tax allowance since 2004. Landowners can deduct up to $3,000 from their income for expenses such as pruning and fertilization for any tree designated as rare, big, old or a combination thereof. The work must be done by a certified arborist, and the deduction can be claimed only every third year. Hawaii has had a list of "Exceptional Trees" since 1975, and there are now estimated to be more than a thousand such designated trees.

2. Maine: Blueberries And Clams
Maine legislators tax anyone who deals in their official state fruit of blueberries, at the rate of 1.5 cents per pound. The resulting revenues—more than $1.6 million to the state in the fiscal year ended June 2013—are used to promote the crop and agricultural research. [not sure what that has to do with clams :)]

3. Alabama: Playing Cards
Alabama is the last remaining state in the union to tax a deck of cards as if it were a vice, like alcohol and tobacco. Taxing decks of cards, originally associated with gambling, was once fairly common. However, most states have since set up separate control boards to regulate liquor and tobacco, and have eliminated cards from that special tax category.

4. Virginia: Sheep
Virginia levies a 50-cent excise tax on every lamb or sheep sold in the state. The funds collected go to the Virginia Sheep Industry Board, which spends the money largely on predator control.

5. Maryland: The Rain?
In 2013, Maryland legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. This action, taken in 2013, was for the purpose of funding programs to improve the water quality of the Chesapeake Bay, the largest marine estuary in the U.S. The manner in which the Maryland legislators wrote the law has led to an angry backlash in some areas against this so-called rain tax. One way localities calculate the tax is by measuring how much of a landowner's property prevents precipitation from being able to seep into the ground. The more the property is developed with buildings, driveways, tennis courts, etc., the less it will be able absorb precipitation thus the more the owner pays. Many landowners are extremely unhappy about it and newly elected Maryland Gov. Larry Hogan has introduced legislation to repeal it, though it's not clear it will get through the state legislature. The state needs to raise money to satisfy the federal pollution mandates, but the methods may change.

6. Kansas: Weak Beer
Kansas is among several jurisdictions that allows sale of lower-alcohol beer (the actual term is cereal malt beverage) in convenience and grocery stores. But Kansas also taxes 3.2 beer differently, and therein lies the problem. At a liquor store, all products, including, a conventional six-pack of beer such as Budweiser (with 5 percent alcohol by volume), are taxed at a special rate of 8 percent. At the convenience store down the street, however, ordinary sales tax is levied on the lower volume alcohol beer (the 3.2 percent cereal malt beverage). That often ends up being more than the 8 percent alcohol tax.

7. California: Strong Liquor
When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that's why Kansas's beer tax law is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay big time. Distilled spirits are taxed at $3.30 a gallon if below 100 proof (50 percent alcohol). Higher than that and the tax doubles.

8. Nevada: Entertainment
Entertainment venues pay a business tax to Nevada ranging from 5 percent to 10 percent on admissions fees (and food, drink and merchandise sales) whenever there's live entertainment going on. There are exemptions, however, including this one, for businesses that provide "instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen."

9. New Jersey: Costly Cars With Bad Mileage
Want to own a plush or fuel-thirsty ride? That'll cost you extra in New Jersey. Cars that cost $45,000 or more or have a combined EPA fuel-mileage average of 19mpg or below pay an additional 0.4 percent on top of New Jersey's 7 percent sales tax.

And finally…a perk for tax-payers.

10. New Mexico: Centenarians
In New Mexico, making it to 100 years has a payoff—you don't have to pay state income tax anymore. If you've been physically present in the state for at least six months and a resident of the state on the last day of the year, and you're not someone's dependent, you're eligible. You'll still need to file, and there are some complications if you're married and your spouse doesn't qualify for the deduction.

Any strange taxation laws in your state?


Ashantay said...

Interesting post! In NC, if you receive a tax refund one year, you must add that amount in as "income" the following year. I'm not aware of oddball or special taxes, though.

Samantha Gentry said...

Ashantay: Hmmm...that seems to me to be taxing already taxed money. A refund isn't income, it's the return of money you paid and didn't need they already taxed rather than 'new' money. Seems wrong. :(

Thanks for your comment.

Liz Flaherty said...

This is so interesting!

Samantha Gentry said...

Liz: I'm glad you enjoyed it.

Thanks for your comment.