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Sales Tax Takes a Holiday

Published on Aug 1, 2014

Summary

Many states have sales tax holidays. If you are a retailer in one of these states, here are five tips to make the most of the holiday.
sales tax holidayWhere has the summer gone? It’s already “back to school” time with many school districts set to reconvene classes in only a few weeks. In many states, “back to school” means "sales tax holiday" which provide a (very) short-term exemption from sales tax on many school-related items.  If you are in one of the states that have a sales tax holiday, here are five tips to make this busy shopping time easier on you and your employees. Know What Is “On Holiday” in Your State Not all items are exempt from tax during the holiday. All the states provide that the exemption applies only to certain items. Most limit the exemption to items under a certain price.  And, you may still have to impose local taxes—even if there is no state tax due. The nuances of the laws can be surprising. For example, Florida exempts a backpack—but not a briefcase—from tax during the sales tax holiday. Your state department of revenue website provides a comprehensive listing of what is and isn't tax-exempt.  Print out the list. Make sure there are copies at each cash register. Have the list available throughout the store to help your customers know what is exempt. Stock Your Shelves Make sure you have enough inventory to meet the demand. This is especially important for items that are purchased in large quantities only at back-to-school time. Spiral note books, notebook paper, pens, pencils, and markers fall into this category. Running out of an item can result in lost sales. It can also cost you goodwill with your customers--even if you issue rain checks because, in nearly every state, customers have to pay sales tax when they redeem the rain check. Market with Back-to-School in Mind If you are in a sales tax holiday state, you are almost always required to participate if you sell any items on your state’s tax-exempt list. So, you may as well make the most of it by designing special promotions and advertising to bring new customers into your store—with the goal of turning them into repeat customers. Focusing on repeat business is important because many tax experts feel that sales tax holidays don't generate any extra revenue for retailers. The tax holiday does not affect buying decisions; it simply shifts when the purchases are made. Translated, this means that you may see a flood of customers during the holiday, but diminished traffic during the remainder of the month. Your marketing strategy should meet two goals:
  • increase spending on non-tax-exempt items during the holiday weekend by offering discounts or special pricing on non-exempt items, such as sports equipment and beauty products
  • bring customers back into your store after the weekend is over by offering coupons for repeat purchases of school supplies later in the year (when the kids have lost their notebooks and destroyed their markers).
Prepare Your Employees Knowledgeable, competent, helpful, friendly employees create customer goodwill. This is especially important when your store is crowded and procedures are more complex. Make sure each employee understands what is tax-exempt and your state’s rules regarding discounts, buy-one-get-one offers and other pricing options.  If possible, staff up for the peak periods to reduce the annoyance of long lines. Reprogram Your Point-of-Sales Systems You will need to account for tax-exempt and non-exempt sales. Most point-of-sales systems accommodate sales tax holidays. However, you will have to make sure that the overrides are in place and are functioning correctly. If you rely on a service to handle your systems, make sure you contact them well in advance of the holiday weekend to ensure that the system is ready when your doors open for business.