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Sales Tax Takes a Holiday

By Marcia Richards Suelzer, MA, JD | June 29, 2012

While shoppers in 16 states can save some money by taking advantage of upcoming back-to-school sales tax holidays, retailers need to review the rules to determine what items are tax-exempt.

Sales tax holidays provide a time-limited exemption from the state sales tax that would normally be collected on certain items. (Depending upon the state, city or other local sales taxes might still apply.) The type of items and the maximum cost of each item varies widely from state to state. In addition, the rules regarding rain checks, layaway, and gift certificates vary among the states. Each state has its own spin on how to report tax-exempt sales. The bottom line for nearly every small business is recordkeeping headaches in determining what is exempt from tax, and collecting accurate amounts of tax.

Take Action. If you are a retailer in one of these states, make sure that you know what is and is not exempt from tax during your sales tax holidays. You will need to have the exempt items list posted for your employees to consult. You may need to train them on the rules governing layaways, gift cards and discount coupons.

Whether the sales tax holiday is sound fiscal policy--generating more sales or simply shifting the timing of sales--is a matter of debate. What is not in question is that having to comply with a brief moratorium on taxes puts an administrative and training burden on businesses. Not only will you need to train employees on what qualifies and the rules around layaways, gift cards, returns and rain checks, you will also have to make sure that your sales registers ring up the sales correctly.

Tip: If you operate a business in Louisiana, make sure to claim the $25 credit per cash register that the state provides to help defray your reprogramming costs.

The following table provides an overview of the rules in each state. If you live in one of these states, you will want to download the specific information for your state.

State Date Items Rain checks/Layaway More Information
Alabama Aug. 5-7 Clothing priced at $100 or less/item
Computers, software priced at $750 or less/item
School supplies priced at $50 or less/item
Noncommercial books priced at $30 or less/item
Rain checks: only if redeemed during holiday
Layaway: only if final payment occurs during holiday
Alabama
Arkansas Aug. 6 at 12:01 am to Aug 7 at 11:59 pm Clothing priced at $100 or less/item
Clothing accessory priced at $50 or less/item
Any school supply, school art supply, school instructional material
Rain checks: only if redeemed during holiday
Layaway: if final payment during or after holiday
Arkansas
Connecticut Aug. 21-27 Clothing and footware priced at $300 or less/item
Does not include accessories or protective clothing or footware
Rain checks: only if redeemed during holiday
Layaway: if final payment during or after holiday, provided item was placed on layaway during holiday
Connecticut
Florida August 12-14 Clothing priced at less than $75/item
School supplies priced at $15 or less/item
Rain checks: only if redeemed during holiday
Layaway: if final payment during the holiday or made after holiday, provided item was placed on layaway during holiday
Florida
Iowa August 5-6 Clothing and footware priced under $100/item
Does not include accessories, rentals, athletic, or protective clothing or footware
Rain checks: only if redeemed during holiday
Layaway: if final payment during the holiday or made after holiday, provided item was placed on layaway during holiday
Iowa
Louisiana Aug. 5-6 Any tangible personal property (except cars and meals) up to $2,500 Rain checks: only if redeemed during holiday
Layaway: if final payment during or after holiday
Retailers are eligible for a special "reprogramming" sales tax credit
Louisiana
Maryland Aug. 14-20 Clothing (not accessories) and footware priced under $100/item Rain checks: only if redeemed during holiday
Layaway: if final payment during or after holiday
Maryland
Mississippi July 29-30 Clothing or footware priced under $100/item
Not accessories, rental, skis, swim fins or skates
Rain checks: only if redeemed during holiday
Layaway: layaway sales of eligible items do not qualify for the holiday
Mississippi
Missouri Aug. 5-7 Clothing (not accessories) priced at or under $100/item
School supplies up to $50 per purchase
Computer software priced under $350/item
Computers & peripherals up to $3,500
Rain checks: only if item is paid for during holiday
Layaway: only if final payment during holiday
Localities may opt out; In lieu of reprogramming cash registers, retailers can provide a tax refund on exempt items if they have less than 2 percent of merchandise qualified for holiday.
Missouri
New Mexico Aug. 5-7 Clothing and footware priced under $100/item--but not accessories, athletic or protective clothing
School supplies
Computers priced under $1,000/item
Computer peripherals priced under $500/item
Rain checks: only if item is paid for during holiday
Layaway: only if final payment during holiday
Retailers are not required to participate
New Mexico
North Carolina Aug. 5-7 Clothing (not accessories or protective equipment) priced at or under $100/item
School supplies priced at or under $100/item
School instructional material priced at or under $300/item
Sport/recreational equipment priced at or under $50/item
Computers priced at or under $3,500/item
Computer supplies priced at or under $250/item
Rain checks: only if redeemed during holiday
Layaway: if final payment during or after holiday
North Carolina
Oklahoma Aug. 5-7 Clothing and footwear priced under $100/item
(Not accessories, rentals, athletic or protective clothing/footwear)
Rain checks: only if item is paid for during holiday
Layaway: only if final payment during holiday
Oklahoma
South Carolina Aug. 5-7 clothing (not rentals), clothing accessories, footwear, school supplies, computers, printers, printer supplies, computer software, bath washcloths, bath towels, bath rugs, shower curtains, bed linens, pillows Rain checks: only if redeemed during holiday
Layaway: layaway sales of eligible items do not qualify for the holiday
South Carolina
Tennessee August 5-7 Clothing (not accessories) priced at or under $100/item
School and school art supplies priced at or under $100/item
Computers priced at or under $1,500/item
Rain checks: only if redeemed during holiday
Layaway: Qualifying items placed on or picked up from layaway during the holiday are exempt from sales tax
Tennessee
Texas Aug. 19-21 Clothing and footwear (excluding accessories, athletic, protective and rentals) priced under $100/item
School backpacks priced under $100/item
Not specifically stated Texas
Virginia Aug. 5-7 Clothing and footwear priced at or under $100/item
School supplies priced at or under $20/item
Rain checks: only if redeemed during holiday
Layaway: Items placed on layaway during holiday are exempt; final payments made during holiday are exempt for items already on layaway
Virginia

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