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Budget and Policy Post
May 12, 2019

The 2019-20 May Revision

Sales Tax Exemptions for Diapers and Menstrual Products


California’s Sales Tax. California’s state and local governments charge a sales tax on the retail sale of tangible goods. The average rate is 8.6 percent. Of that, 3.94 percent raises money for the state’s General Fund, and 2.06 percent raises money the state provides to counties for various local programs. Local governments’ portion of the sales tax ranges from 1.25 percent to 4.5 percent. As a result, the overall rate ranges from 7.25 percent to 10.5 percent depending on the local jurisdiction.

Sales Tax Exemptions. Although tangible goods generally are subject to sales tax, state law exempts some specified goods. As described below, for example, prescription medicines are exempt.

Sales Tax Applies to Diapers and Menstrual Products. Diapers and menstrual products are tangible goods. Under current law, there is no exemption for retail sales of these goods, so they are subject to sales tax.

Governor’s Proposals

In the May Revision, the Governor has proposed two new sales tax exemptions that would go into effect on January 1, 2020 and expire on December 31, 2021: one for menstrual products and another for children’s diapers. These exemptions would apply to the full amount of the state and local sales tax. The Governor’s proposal would require our office to submit reports evaluating these exemptions by January 1, 2021.

Sales Tax Exemption for Children’s Diapers. In the May Revision, the Governor proposes a new sales tax exemption for diapers intended for use by children. The administration estimates that the forgone revenue from this exemption will be $12 million General Fund ($26 million total) in 2019‑20, $24 million General Fund ($52 million total) in 2020‑21, and $12 million General Fund ($26 million total) in 2021‑22.

Sales Tax Exemption for Menstrual Products. In the May Revision, the Governor proposes a new sales tax exemption for tampons, sanitary napkins, menstrual cups, and menstrual sponges. The administration estimates that the forgone revenue from this exemption will be $5.5 million General Fund ($12 million total) in 2019‑20, $11 million General Fund ($24 million total) in 2020‑21, and $5.5 million General Fund ($12 million total) in 2021‑22.

Sales Taxation of Necessities

What Is a “Necessity”? There is a wide range of reasonable definitions of necessity. At one end of the spectrum, anything essential for short-term survival certainly is a necessity. At the other end, if a person can attain a generally accepted standard of living without using something, then that thing likely is not a necessity. In this section, we summarize the treatment of necessities under the state’s current sales tax policies.

State Has Major Sales Tax Exemptions for Some Necessities

Food, Prescription Medicines, and Utilities Exempt From Sales Tax. California has three longstanding multibillion-dollar exemptions for necessities: food products, prescription medicines, and utilities (water, gas, and electricity). In many cases, these goods are essential for short-term survival, making them necessities by any reasonable definition.

Sales Tax Applies to Many Goods Reasonably Defined as Necessities

Sales Tax Applies to Wet Wipes, Toilet Paper, and Soap. Like diapers and menstrual products, these goods address unavoidable bodily functions. Their hygienic benefits help people participate in everyday life.

Sales Tax Applies to Many Goods Used to Prevent or Treat Disease, Injury, or Death. For example, sales tax applies to bandages, condoms, toothbrushes, bicycle helmets, children’s car seats, and over-the-counter medications.

No Universal Definition of Necessity

Definition of Necessity Often Is Highly Subjective. As suggested by the phrase “generally accepted standard of living,” definitions of necessity often are highly subjective. For example, a 2010 Pew survey estimated that 86 percent of Americans regarded cars as necessities. We are not aware of any proposals to exempt cars from the sales tax.

Broad Product Categories Can Include Both Necessities and Luxuries. Human survival depends on food in general, but not on any food item in particular. Furthermore, many specific food items (such as truffle oil) clearly are luxuries, yet are exempt from sales tax. Similarly, clothing is a basic human need, but many clothing items are luxuries.

The Same Item Can Be a Necessity or a Luxury, Depending on the Context. The sales tax exemption for utilities applies to water used for drinking and bathing, but also to water used for decorative landscaping. Gasoline used to drive to concerts and amusement parks is subject to local sales taxes as well as state and federal excise taxes. The same taxes apply to gasoline that ambulances use to transport patients to hospitals. (The ambulances themselves also are subject to sales tax.)

LAO Comments

Diaper Exemption Less Targeted Than Alternatives

Diaper Exemption Would Provide Broad but Limited Benefit to Parents. Under the Governor’s proposed diaper exemption, parents throughout the income distribution would save some money while their children are very young. At most, parents would save 10.5 percent when purchasing diapers.

Alternatives Could Provide More Substantial Benefits to Families With Greatest Needs. If the Legislature wants to help parents with the costs of raising children, it has some opportunities to offer substantial assistance to some families with acute financial needs. For example, the state can expand a program that addresses one of the biggest expenses parents face: child care. The state funds various types of subsidized child care for low-income families, but the number of eligible children typically exceeds the number of “slots” funded by the state. Due to this shortfall, the state fails to assist part of the targeted population and creates an inequity between those who receive slots and those who do not.

Consider Allocating Funds To Child Care Instead. The Legislature could consider rejecting the Governor’s proposal and using the resulting increase in General Fund revenue to fund additional child care slots. In particular, this revenue—estimated to be $12 million General Fund and $26 million total in 2019‑20—could be spent as follows. Proposition 98 would allocate roughly $4.6 million to schools. The amount set aside by Proposition 2 for reserves and debt payments would decline by $0.8 million due to the increase in non-capital gains revenue. The state could use the resulting $8 million to fund roughly 800 child care slots. Under this alternative, the proposed $14 million reduction in local sales tax revenue would instead go to local programs as specified under current law. (The dollar amounts and the number of additional child care slots would roughly double in 2020‑21.)

Menstrual Products Exemption Partially Addresses Equity Concern

Equity Concerns Related to Menstruation. The proposed exemption for menstrual products aims to address an inequity. People who menstruate cannot reasonably avoid using menstrual products. Some have raised a gender equity concern: the costs of these products put many women and some transgender men at a financial disadvantage relative to others. Public policies can narrow this inequity or exacerbate it to varying degrees.

Equity Concern Could Apply to Various Programs. As shown in Figure 1, the state’s policies on menstrual expenses vary across programs. For example, Chapter 687 of 2017 (AB 10, Garcia) requires relatively high-poverty middle schools and high schools to provide free menstrual products in restrooms. In many other areas, however, the state’s policies could raise the equity concern described above. For example, the personal income tax does not include any credits or deductions related to menstrual expenses. As a result, the state taxes the income used to purchase menstrual products at the same rate as other income.

Figure 1

Policies on Menstrual Expenses in Some Major Programs

Program Area

Policy on Menstrual Expenses


Sales and use tax

Retail sales of menstrual products taxed at same rate as retail sales of other tangible goods.

Personal income tax

Income used to purchase menstrual products taxed at same rate as other income.


Cal Grants

Nontuition award amounts not adjusted for menstrual expenses.

Public schools

Relatively high‑poverty middle schools and high schools must provide free menstrual products.

Human Services


Eligibility criteria and grant amounts not adjusted for menstrual expenses.


Eligibility criteria and grant amounts not adjusted for menstrual expenses.

Sales Tax Addresses Equity Concern Broadly but Modestly. The proposed sales exemption for menstrual products would result in modest cost reductions for all purchases of those products. The five other programs listed in the figure could not address the identified equity concern as broadly, but they would give the Legislature some flexibility in the degree to which it could offset menstrual expenses. For example, the Legislature could create a refundable income tax credit for menstrual expenses, which could more substantially offset menstrual expenses than a sales tax exemption.

Consider Broader Range of Options for Addressing Menstrual Equity Concerns. As an unavoidable and largely gender-specific expense, menstrual products are distinct from most tangible goods, potentially warranting an exemption from the sales tax. As noted above, however, the Legislature has a wide range of options for addressing the gender inequity associated with menstrual expenses. To the extent that addressing this inequity is a policy priority, the Legislature may wish to consider other policy changes instead of or in addition to the proposed sales tax exemption.

Expiration Dates and Reporting Requirements

Tax Expenditures Generally Should Include Expiration Dates, but Two Years Is Too Short. The annual budget process gives the Legislature a natural opportunity to review and possibly modify conventional expenditures. Expiration dates provide similar opportunities for tax expenditures, helping the Legislature make the best use of its budgetary resources. However, businesses, consumers, and local governments would benefit from predictability in these policies. If tax expenditures—particularly those with fiscal effects as modest as these—are worth enacting, then they are worth enacting for longer than two years. A later expiration date also could provide the Legislature with additional information to assess the continuation, modification, or expiration of the sales tax exemptions.

Consider Later Expiration Dates. If the Legislature chooses to adopt either or both of the proposed exemptions, it may wish to consider setting later expiration dates. Anywhere in the range of four to ten years could be reasonable. Given the different policy considerations involved in the two exemptions, it would be reasonable for the Legislature to put them in place for different lengths of time. In particular, if the Legislature views the taxation of menstrual products as fundamentally unfair, it likely will not want to reverse course just two years—or even five years—later. In contrast, the Legislature often adjusts its strategy for providing financial assistance to parents, so a four- or five-year window could be appropriate for the diaper exemption.

Proposal Does Not Require Administration to Collect Data. The California Department of Tax and Fee Administration (CDTFA) typically does not require retailers to provide data regarding specific exempt goods. Under this proposal, we do not expect that CDTFA or any other department would collect administrative data that could be used to quantify the revenue losses from these exemptions, let alone examine other aspects of these policies. (The current fiscal estimates are subject to considerable uncertainty.) Such data could help the Legislature monitor these policies. On the other hand, such data collection requirements could be burdensome for retailers and CDTFA. The analysis that the Governor’s proposal would require our office to submit by January 1, 2021 would be limited by CDTFA’s current data collection practices.