Editor’s Note: This guest blog post comes courtesy of Gail Cole with Avalara.
Since there’s something inexplicably festive about not having to pay sales tax on normally taxable purchases, sales tax holidays are aptly named. For consumers, these events are all about savings. For retailers, they’re about a whole lot more.
Sales tax compliance is always complicated, especially for businesses that make sales in multiple tax jurisdictions. If nothing else, rates are all over the map. States, counties, and cities can levy sales tax in most states, and many allow special tax jurisdictions to do the same. These are often highly localized, covering one section of a street or even one side of a street, and there are roughly 2,200 of them in Missouri alone.
On top of rates, retailers need to consider various product taxability rules. Some states exempt most sales of clothing, some tax them, and some exempt clothing and footwear with a certain sales price. Keeping track of all these rules is an enormous task — and sales tax holidays change the rules, temporarily, in some states.
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For example, many articles of clothing and footwear priced at $60 or less will be exempt from Florida sales tax this August 3–5, while in Iowa, certain clothing and footwear will be exempt August 3–4 if it costs less than $100. Business that sell clothing to destinations in both these states need to adjust point-of-sale systems accordingly, following each state’s rules to the letter.
In addition to product taxability changes, tax-free periods often impose different rules on layaways. Layaways of eligible items don’t qualify for the temporary exemption during Mississippi’s July 2018 sales tax holiday. During Tennessee’s, however, they do. State sales tax holidays often have contradictory rules for exchanges and returns, too.
One thing all states agree on is that online retailers are required to comply with sales tax holiday rules the same as brick-and-mortar retailers. So, no matter where your business is located, if you’re registered to do business in a state with a sales tax holiday, you should prepare to for the onslaught of summer sales tax holidays.
For a list of sales tax holidays taking place in August 2018, check out this blog from Avalara!
Avalara helps businesses of all sizes achieve compliance with transactional taxes, including sales and use, VAT, excise, communications, and other tax types. The company delivers comprehensive, automated, cloud-based solutions that are designed to be fast, accurate, and easy to use.