Although the majority of 2022 state tax changes take effect at the start of the calendar year, some are implemented at the beginning of the fiscal year. Individual and corporate income tax changes usually take effect at the beginning of the calendar year to maintain policy consistency throughout the tax year – but sales and excise tax changes often correspond with the beginning of a fiscal year.
In fact, 13 states had notable tax changes take effect on July 1, which is the first day of fiscal year 2023 for every state except Alabama, Michigan, New York and Texas.
Gas taxes increased in two states due to previously scheduled statutory rate adjustments, while gas tax rates rose in six other states due to inflation adjustments or other automatic factors. Additionally, several states adopted new sales tax exemptions.
Here’s a more detailed look at some of the tax changes that took effect on July 1, as reported by the Tax Foundation, a leading independent tax policy nonprofit, based in Washington D.C.
New Mexico: New Mexico becomes the first state in many years to reduce its state-level sales tax rate, which the state refers to as its gross receipts tax. On July 1, the state rate dropped from 5.125 percent to 5 percent, with a further reduction to 4.875 percent scheduled for July 1, 2023.
This reduction comes with a contingency plan: if the revenue from the gross receipts tax in any single fiscal year from 2026 to 2029 is less than the 95 percent of the previous year’s revenue, then the rate will return to 5.125 percent on the following July 1.
Missouri: Last October, Missouri legislators enacted a bill to increase the state’s gas tax 12.5 cents by July 2025. The gas tax increased by 2.5 cents last October and increased another 2.5 cents on July 1.
South Carolina: In 2017, South Carolina passed legislation that raises the gas tax by 2 cents each July from 2017 to 2022. The state gas tax saw its final increase of 2 cents on July 1, raising the tax from 26 to 28 cents a gallon.
Various States: In California, Connecticut, Illinois, Indiana, Maryland and Nebraska, motor fuel taxes were adjusted July 1 – due to inflation, changes in the average wholesale price of fuel or other automatic factors. Gas taxes were slated to increase in Kentucky for similar reasons, but Gov. Andy Beshear issued an executive order to freeze the gas tax at its current level through January 2023.
Colorado: Beginning in July, Colorado residents began paying a “retail delivery fee” – basically, a tax of 27 cents per sale, which will be paid on all deliveries that include at least one item subject to the sales tax. The fee is levied on the end-consumer but will be collected by retailers and marketplace facilitators. The 27-cent levy consists of six separate fees, which reference air pollution mitigation, bridges and tunnels, clean transit, and more.
New Hampshire: Effective July 1, New Hampshire lawmakers began passing along a portion of the state’s budget surplus to local political subdivisions, with those funds to be used to help offset a one-time reduction in local property tax levies.
