Essential hygiene products will be exempted from sales tax beginning Jan. 1, 2023, but the law went into effect August 10, 2022 allowing time for the agencies to work with the business community. This date is important because it is now officially law so the Department of Revenue is updating its sales tax guidance for local governments and retailers/businesses and consumers.
The bill, which took effect to allow DOR to work with stakeholders on implementation, creates a state sales and use tax exemption commencing January 1, 2023, for all sales, storage, use, and consumption of incontinence products and diapers and period products. The bill further provides that statutory cities and counties may choose to adopt either or both exemptions by express inclusion in their sales and use tax ordinance or resolution. Self-collecting home-rule municipalities are not affected by this change. The January release of the Colorado Sales and Use Tax Rate publication (DR 1002) will list those state-administered local jurisdictions that will allow the exemption. Local exemptions, including exemptions allowed by self-collecting home-rule municipalities, may also be searched by address using the Colorado Sale Tax Lookup tool.
The bill creating the exemption took effect on August 10, 2022. However, the exemption created by the bill applies to sales on and after January 1, 2023. Sales tax changes commonly start in January or July in order to give the Department and local retailers time to update systems, forms, and documentation.