Posted on July 28, 2020
Sales tax holidays or tax-free weekends is a time that many consumers look forward to each year. Typically, these holidays will correspond with the start of the new school year. During this time, some states will remove the sales tax requirement from the purchase of items usually used in the upcoming school year. These purchases can include clothing, footwear, personal computers, and school supplies. Some states may also provide exemptions on additional items such as bedding or emergency preparedness items.
Each state will publish specific rules and regulations for qualifying items. It is important for taxpayers and consumers to be aware of rules put in place by each state during sales tax holidays as they will be different for each state and will include different allowances or restrictions.
Important Information for Businesses
States offering sales tax holidays should provide definitions to further explain the exempt items and what items will remain taxable. This information is extremely important for businesses that collect and pay sales tax. Reviewing the regulations and determining the taxability of the merchandise being sold at retail locations can be difficult, especially for smaller businesses without a tax department or front-end tax system.
Having a tax department or front-end tax system helps ensure tax is still being collected on the correct items. If a business incorrectly exempts non-qualifying items during the sales tax holiday, they will be unable to explain why tax was not collected. Under audit if the business has no proof of exemption for these taxable items, they will owe the outstanding tax along with penalties and interest.
Florida Sales Tax Holiday
On June 24, 2020 TIP#20A01-04 was issued by the Florida Department of Revenue to notify businesses and residents of the upcoming Back-to-School Sales Tax Holiday beginning on Friday, August 7, 2020, and ending on Sunday, August 9, 2020. During this time, sales tax will not be collected on purchases of clothing, footwear, and certain accessories selling for $60 or less per item. In addition, purchases of certain school supplies selling for $15 or less per item and the first $1,000 of the sales price of personal computers or related accessories when purchased for noncommercial home or personal use will be exempt from sales tax. A full list of qualifying items and restrictions is provided online at https://bit.ly/39BZvFD.
Florida’s Tax Information Publication will outline directions for taxpayers in handling different scenarios such as gift card usage, exchanges, rain checks and mail-order, catalog, or online sales. The state also provides businesses with the option to not participate in the sales tax holiday when less than five percent (5%) of their gross sales of tangible personal property during calendar year 2019 were sales of items that would be exempt during the sales tax holiday period. Qualifying businesses choosing not to participate in the sales tax holiday must send a written notice to the Florida Department of Revenue by August 1, 2020.
Ohio and Texas Sales Tax Holidays
Ohio and Texas are offering a sales tax holiday between Friday, August 7, 2020, and ending on Sunday, August 9, 2020, for items typically purchased at the start of the school year. Ohio is providing an exemption of sales tax on purchases of clothing priced at $75 or less, school supplies priced at $20 or less, and school instructional material priced at $20 or less. Texas is offering a more general sales tax exemption on the purchase of clothing, footwear, backpacks, and school supplies costing less than $100. Rules and regulations outlined by the Ohio Department of Taxation can be located online at https://bit.ly/2BG6eSE and the Comptroller of Texas has published details of their sales tax holiday online at https://bit.ly/311g9ei.
South Carolina Tax-Free Weekend
The South Carolina Department of Revenue (SCDOR) has selected to offer their sales tax-free weekend from Friday, August 7, 2020, and ending on Sunday, August 9, 2020. The state is offering a larger selection of items exempt from tax during this time to include select clothing and accessories, school supplies, computers and technology, and bed and bath items, which differs from the previously discussed sales tax holidays. The SC DOR has provided their regulations as well as helpful checklists online at https://dor.sc.gov/taxfreeweekend.
Virginia Sales Tax Holiday
Virginia is offering a similar sales tax holiday from Friday, August 7, 2020, and ending on Sunday, August 9, 2020 to include qualifying school supplies of $20 or less per item and qualifying clothing and footwear of $100 or less per item.
In addition to the traditional back-to-school items, Virginia is also removing the requirement to collect sales tax on the purchase of specified hurricane or emergency preparedness items and Energy Star™ and WaterSense™ products. A detailed list of all qualifying items has been published online at https://bit.ly/33fBcwr.
Tips for the Taxpayer
For businesses participating in the upcoming sales tax holidays, it is important to understand the requirements outlined by each state. These publications will detail specifications that will either qualify a purchase to be tax-free or exclude it from the tax break. Businesses must ensure they are applying tax appropriately on items that remain taxable as it is their responsibility to collect and remit tax to the state where they operate.
If you are a consumer shopping for school-type supplies or clothing or other merchandise, check out the lists of qualifying items provided by each state in advance to see what might be exempt during the upcoming sales tax holidays. Consumers can reduce their tax spend by planning certain purchases around sales tax holidays. With US combined state and local sales tax rates ranging from 1.76% to 9.55% depending on location, it may be a prime time to take advantage of such tax incentives while they are available.
How Can We Help?
Allyn International offers business tax services for companies throughout the US and Canada. Allyn’s tax team is experienced in all aspects of Federal, state, and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage.
Allyn files state and local sales and use every US taxing jurisdiction. We can manage your tax compliance, create a solid tax process, and provide audit defense for your company. This is especially important when temporary changes to sales tax regulations like sales tax holidays or tax-free weekends take place. We can assist with ensuring sales tax is collected on taxable sales and provide consultation when interpreting the publications sent out by multiple states with varying changes.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: email@example.com.
For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.
Contributor: Meghan O'Hehir
About Allyn International
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