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Big States Eye Tax Breaks on Face Masks and Hand Sanitizers

Sept. 24, 2020, 8:46 AM

Governors and legislatures are examining options for tax relief against purchases of personal protective equipment during the Covid-19 pandemic, particularly as employers develop return-to-work strategies.

While the approaches differ, several states already have laws and guidance addressing tax breaks for equipment such as face masks, gloves, gowns, respirators, disinfectant wipes, soaps, and hand sanitizers. Active legislatures in Massachusetts, Michigan, and New York are considering bills that expand their PPE tax benefits, but action is expected to escalate next year when most legislatures convene—even as states struggle with virus-induced revenue shortfalls.

“There is a lot of attention on this, with the population at large wanting their governments to support efforts to keep everyone safe,” said Verenda Smith, deputy director of the Federation of Tax Administrators. She expects most legislatures to “look at some options” on the tax front, with action ramping up in January and February.

The idea has attracted a lot of interest from business interests in Michigan promoting strategies that both sustain the state economy and keep workers safe.

“If we can agree on the science that PPE is a lifeline for businesses to stay open, then the way to do that is to make PPE more affordable,” said Matt Patton, director of government relations at the Detroit Regional Chamber. “Currently in Michigan, if you are a business that does anything other than manufacturing products for retail, you are paying taxes on your PPE during this pandemic.”

Whether states actually enact exemption or credit programs is another story, Smith and others said. In a climate of declining revenues, states will have to be very cautious about new tax expenditures.

“I would be surprised if these PPE ideas went very far,” said Kenneth Webster, director of research for the sales tax technology and consulting company TTR. He describes legislative actions as “a balancing act.”

“With the economy on lockdown for the last six or eight months, state revenues are in the toilet. You can’t be in a situation where the state can’t pay for essential services,” he said.

Inconsistent and Narrow

States have generally declined to establish wholesale exemption schemes addressing protective equipment. The PPE tax map is best described as an inconsistent collection of benefits targeting different industries, equipment, and consumers in each state, Webster said.

The pandemic unleashed unprecedented demand for protective products, and some states launched initiatives to replenish state stockpiles, support PPE manufacturers, or protect vulnerable communities.

California Gov. Gavin Newsom (D) issued an Executive Order exempting state purchases of PPE. Pennsylvania issued guidance exempting face masks from sales tax. Georgia enacted a law that created a $1,250-per-employee tax credit for PPE manufacturers. And Florida and Texas came to the rescue for parents, specifying that face masks qualified for their back-to-school sales tax holidays.

Legislative Action

Several legislatures are debating more expansive tax benefits assisting both consumers and employers, said Jackson Brainerd, a tax policy analyst with the National Conference of State Legislatures.

Michigan lawmakers are pushing three bills benefiting a wide range of businesses not covered by an existing exemption reserved for manufacturers. The Michigan Department of Treasury published guidance in July acknowledging that certain manufacturing businesses would qualify for the state’s “industrial processing exemption” for purchases of PPE.

“We all know the challenges small business continue to face during the Covid-19 crisis,” Rep. Michael Webber (R) said during a Sept. 15 tax committee hearing. “The added expense of enhanced workplace cleaning and providing PPE to their employees is an unforeseen expense that many employers didn’t account for when planning their budgets for 2020.”

The package includes H.B. 6033 and H.B. 6034, providing a sales and use tax exemption on PPE purchases by employers maintaining a Covid safety protocol plan. The exemption would be retroactive to March 10 and extend through Dec. 31, 2021. Michigan is also considering H.B. 6035, which would grant employers a refundable income tax credit on PPE purchases.

The bills are opposed by the Treasury Department. During the hearing, the department’s legislative liaison, Rachel Richards, pointed to “potentially significant revenue impact.” The House Fiscal Agency projected a loss of at least $15 million in tax revenue through fiscal 2022, and a loss of at least $35 million from corporate income tax collections.

New York and Massachusetts

New York is another state making an expansive pitch for PPE tax relief. Several bills are pending, including measures that exempt masks and shields from sales tax, grant a tax credit to employers on purchases of PPE, and create up to a $5,000 tax deduction for PPE expenses incurred by health care workers.

Massachusetts state Rep. Josh Cutler (D) introduced H. 4760, creating a sales tax exemption for protective facial coverings. The bill came after the state revenue department issued guidance specifying that face masks are taxable, but scarves and bandannas “are considered clothing and will not be taxed.”

Brainerd predicted high levels of interest for the Massachusetts, Michigan, and New York models in other state legislatures in January. Lawmakers, however, will have to weigh tax relief against budgetary pressures wrought by the pandemic.

“I wouldn’t be surprised if other states consider trying to provide some sort of sales tax relief for business PPE purchases to promote safe workplace reopenings, as that seems to be a common concern,” Brainerd said. However, measures involving “significant revenue reduction will probably face a good bit of scrutiny.”

To contact the reporter on this story: Michael J. Bologna in Chicago at

To contact the editors responsible for this story: Jeff Harrington at; Yuri Nagano at