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All Contents © 2016The Kiplinger Washington Editors
Funny thing about our federal system of government: There’s that complicated tax code that Uncle Sam keeps and the IRS enforces.
Then there’s an even larger patchwork of taxation schemes crafted by 50 state legislatures, all coming up with new ways to extract coin from their citizenry. Some of these tax regimens are, well, quirky.
We’ve found ten of the strangest from across the land. Did we miss an odd tax unique to your state? Look for the e-mail address at the end of the slideshow to tell us about yours. In the meantime, here are ten of the most unconventional.
By David Muhlbaum, Online Editor
| February 2015
The Aloha State legislature, in an effort to preserve the uniqueness of their island paradise, has an “Exceptional Tree” tax allowance. 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. That’s per tree. Top-bracket earners taxed at the state's highest rate (11%) would save $330 via the deduction.
The work must be done by a certified arborist, and the deduction can be claimed only every third year. The deduction was enacted in 2004. Hawaii has had a list of “Exceptional Trees” since 1975, and there are now estimated to be more than a thousand thus designated.
Zirpe/Dladek via Wikimedia Commons
Maine legislators, a flinty bunch, tax anyone who deals in their official state fruit—blueberries, at the rate of $0.015 per pound. The resulting revenues—more than $1.6 million to state coffers in the fiscal year that ended in June 2013—are used to promote the crop and agricultural research.
The state also taxes harvesters and processors of hard-shell clams (known in the state as mahogany quahogs) at $1.25 a bushel, but state revenues for that are much lower. The taxes are levied at the wholesale level, but naturally, they end up being passed on to the consumer.
The Yellow Hammer State is the last in the union to tax a deck of cards as if it were a “vice,” like alcohol and tobacco.
Taxing decks of cards, associated with gambling, was once fairly common, but most states have since set up separate control boards to regulate liquor and tobacco, and have let the cards slide.
But in Alabama, you’ll still pay a 10 cent sales tax on any pack of cards you purchase. Retailers also have to pay $2 to the state each year for the privilege of selling playing cards.
Just as Maine taxes its blueberries and clams, Virginia taxes its … sheep. The Old Dominion levies a $0.50 excise tax on every lamb or sheep sold in the state.
Both the Maine and Virginia taxes are examples of “checkoff” programs that collect taxes from an industry to fund promotional campaigns for the products. National commodity checkoff programs, authorized by the U.S. Department of Agriculture, have brought you campaigns such as “Beef: It’s What’s for Dinner” and “Got Milk?”
But the Virginia program is extremely modest by comparison, having collected only $9,000 in fiscal year 2013. The funds go to the Virginia Sheep Industry Board, which spends them largely on predator control.
“Merlyners” love their pollution-beleaguered Chesapeake Bay, the largest marine estuary in the U.S. In 2013, in part to meet federal pollution-control mandates, Free State legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. The fees were meant to fund programs to improve the water quality of the Bay.
Sounds simple enough, but the way Maryland legislators wrote the law has led to an angry backlash in some corners against this so-called “Rain Tax.” One way localities calculate the tax is by measuring how much of a landowner’s tract is "impervious" to precipitation seeping into the ground. So the more you've developed it with buildings, driveways, tennis courts and the like, the less it will absorb and the more you pay. That's how the tax is being implemented (through aerial and satellite photos) in Montgomery County, Md., a heavily developed suburb of Washington, D.C., and many landowners are up in arms.
New Maryland Governor Larry Hogan, a Republican, campaigned against this tax in his winning 2014 campaign and has introduced legislation to repeal it, though it’s not clear that will fly with Democratic state legislators. Money still needs to be raised to satisfy the federal pollution mandates, but the methods may change.
The Sunflower State is among a bevy of jurisdictions that allows sale of lower-alcohol beer (the term of art is “cereal malt beverage”) in convenience and grocery stores.
But Kansas also taxes “3.2” beer differently—and there lies the rub. At a liquor store, all products, including, say, a conventional six-pack of Budweiser (with 5% alcohol by volume), are taxed at a special rate of 8%. At the convenience store down the street, however, ordinary sales tax is levied on the lower-alcohol, cereal malt beverage bottle of Bud. That often ends up being more than the 8% alcohol tax. In Pomona, Kans., for example, the effective rate on the weaker beer would be 9.7%. Go figure.
When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that's why Kansas's beer tax scheme is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay through the nose.
Distilled spirits are taxed at $3.30 a gallon if below 100 proof, or 50% alcohol. Go over that, like with Bacardi 151, and the tax doubles to $6.60. Maryland also notes the 100 proof point, but it only adds 1.5 cents per proof, per gallon to the relatively modest liquor tax of $1.50 per gallon, taking the Bacardi 151 to $2.27 per gallon.
Entertainment venues pay a business tax to the Silver State ranging from 5% to 10% 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."
So your piano player can play “Feelings” softly and even crack a few jokes, tax-free, for your business. Just make sure they're not funny enough to attract attention.
Want to own a plush or fuel-thirsty ride? That’ll cost you extra in the Garden State.
Cars that cost $45,000 or more or have a combined EPA fuel-mileage average of 19 or below pay an additional 0.4% on top of New Jersey’s 7% sales tax.
In the Land of Enchantment, making it to 100 years has a payoff beyond the chance that Willard Scott will wish you a happy birthday: 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.
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