States and Localities Move to Eliminate Sales Tax on Female Hygiene Products

April 28, 2016

The City of Chicago and Cook County recently joined a number of states nationwide in a move to exempt female hygiene products from the sales tax.

At the Local Level

On March 16, 2016 the Chicago City Council voted to exempt certain female hygiene products from Chicago’s Home Rule Municipal Retailer’s Occupation Tax of 1.25%. The City Council also passed two resolutions calling on the Illinois General Assembly and the Illinois Department of Revenue to reclassify female hygiene products as a medical necessity from its current classification as a medical appliance, qualifying those products for a reduced state sales tax rate of 1.0% rather than the higher rate of 6.25%. Soon after the Cook County Board of Commissioners voted to exempt female hygiene products from the Cook County Retailer’s Occupation Tax of 1.75%.

Cook County’s ordinance exempting female hygiene products from its retailer’s occupation tax of 1.75% will take effect January 1, 2017. The City of Chicago ordinance exempting female hygiene products from its retailer’s occupation tax of 1.25% is also scheduled to take effect on January 1, 2017. There were no studies publicly presented on the projected loss in tax revenue from the exemption on these products.

The history of the how the Illinois Department of Revenue (IDOR) and the City of Chicago classify female hygiene products dates back to the late 1980s when a class action lawsuit was filed alleging the City of Chicago illegally taxed female hygiene products purchased from various retailers despite the fact that the IDOR construed those items as “medical appliances” exempt from the sales tax.[1] The lawsuit was eventually decided by the Illinois Supreme Court, which ruled that the tax imposed on the purchase of these items was illegal. The high court held that tampons and sanitary napkins were indeed medical appliances, not grooming and hygiene products, and therefore exempt from the Chicago’s sales tax. However, effective September 1, 2009, the Illinois Department of Revenue (IDOR) reclassified nonprescription medicine and drugs to not include grooming and hygiene products, such as tampons and pads, and subjected them to the higher general merchandise sales tax rate of 6.25%, rather than the reduced rate of 1.0%.[2] This change in classification was made in Public Act 96-0034, related to the Illinois Jobs Now! program that increased various fees and tax rates to help fund the State’s capital improvement program.

The chart below displays the tax rates that purchasers of tampons and sanitary pads were subject to prior to the passage of the ordinances by Cook County and the City of Chicago. With Chicago and Cook County passing legislation exempting these products from its local sales tax, the composite rate imposed on the retail purchase of female hygiene products is reduced to 7.25% in the City of Chicago. If the Illinois Department of Revenue reclassifies certain female hygiene products, those products would qualify for the reduced state sales tax rate of 1%, rather than the current rate of 6.25%.