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Five Tips to Prepare for 2015 Sales Tax Holidays

Published on Jul 14, 2015

Back to school sales tax holidays are coming soon! By Marcia Richards Suelzer, MA, JD It’s only the middle of July, but already summer is winding down for students in most of the United States. Many kids will be heading back to school next month. About one-third of the states recognize this annual event by providing a sales tax holiday, which is a two- or three-day exemption from sales tax on many school-related items. If you are in a state that has a sales tax holiday in 2015, you have some work to do to get ready—because participation is mandatory if you sell items that are on your state’s exempt list. (See the chart at the end of this post for information on which states are participating this year.) Here are five tips to make this busy shopping time easier on you and your employees.

Know What Is Exempt from Tax—and What Isn’t

The holiday was designed to drive sales on school-related items.  But, each state has its own definition of what is “school-related” and the nuances and complexity can be mind-boggling. For example, Alabama exempts a book bag—but not a briefcase—from tax during the sales tax holiday; while, in New Mexico, assignment books are not taxed, but appointment books are taxed. All the states provide that the exemption applies only to certain items. Most limit the exemption to items under a certain price or to a total amount spent within a category of items. For example, most have a limit of $100 per items of clothing. And there are rules regarding discounts, “buy-one-get-one” offers, and other pricing options. For example, in most states, sales tax is due on rain check issued for an item that was tax-free during the holidays. Print out the exempt items list that is on your state’s website. Make sure there are copies at each cash register. Post the list throughout your store to help your customers know what is exempt. Be aware: Even if an item is exempt from state tax, you may still have to impose local taxes. Your state department of revenue website provides a comprehensive listing of what is and isn't tax-exempt.

Stock Your Shelves

Now is the time to make sure you have sufficient inventory to meet the demand. Look at last year’s sales figures, and plan accordingly. This is especially important for items that are purchased in large quantities only at back-to-school time. Spiral notebooks, notebook paper, pens, pencils, and markers fall into this category, as do computers and computer accessories. Running out of an item can result in lost sales. And, 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.

Plan Marketing with Repeat Customers 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. But, make sure to design your promotions with the goal of turning sales-holiday-shoppers into repeat customers. (For example, you could offer coupons for repeat purchases of school supplies later in the year when the kids have lost their notebooks and destroyed their markers. Focusing on repeat business is important. Many tax experts, such as those at the non-partisan Tax Foundation, argue that sales tax holidays don't generate any extra revenue for retailers because they shoppers were going to buy the items anyway. Rather, the holiday 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.

Prepare Your Employees

Knowledgeable, competent, helpful, friendly employees create customer goodwill.  While this is true year-round, it is especially important when your store is crowded and procedures are more complex. Frazzled, crabby employees translate to frazzled, crabby customers—who will vote with their feet for one of your competitors. Make sure each employee understands what is tax-exempt. It’s also important that they understand your state’s rules regarding discounts, “buy-one-get-one” offers, and other pricing options, so they can communicate the rules clearly to customers. For example, in most states, sales tax is due on rain check issued for an item that was tax-free during the holidays. If necessary, schedule employee training to review the rules. 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.

Is Your State Offering a Back to School Sales Tax Holiday?

The following chart, derived from information provided by Federation of Tax Administrators gives the 2015 Holiday dates for each participating state and a link to the department of revenue for complete information.
State Dates in 2015 Information Links 
Alabama August 7-9 http://www.revenue.alabama.gov/
Arkansas August 1-2 http://www.dfa.arkansas.gov/
Connecticut August 16-22 http://www.ct.gov/drs/
Florida August 7-16 http://dor.myflorida.com/
Georgia July 31 - August 1 http://dor.georgia.gov/
Iowa August 7-8 https://tax.iowa.gov/
Louisiana August 7-8 http://www.revenue.louisiana.gov/
Maryland August 9-15 http://www.marylandtaxes.com/
Mississippi July 31-Aug. 1 http://www.dor.ms.gov/
Missouri August 7-9 http://dor.mo.gov/
New Mexico August 7-9 http://www.tax.newmexico.gov
Ohio August 7-9 http://www.tax.ohio.gov/
Oklahoma August 7-9 http://www.tax.ok.gov/
South Carolina August 7-9 http://www.sctax.org/
Tennessee August 7-9 http://tn.gov/revenue/
Virginia August 7-9 http://www.tax.virginia.gov