When you sell certain items, you must collect and remit sales tax. The government requires you to charge customers sales tax at the point of sale. But, some states have created sales tax holidays to give you and your customers a temporary break.
During a sales tax holiday, you do not collect sales tax. This period could be a tax-free day, weekend, or an entire week depending on the state you operate in.
What is a sales tax holiday?
A sales tax holiday is a short-term exemption from the normal state sales tax. Not all states have a sales tax holiday. And, each participating state has different rules for sales tax exemptions.
Each state sets the dates and time-span of the tax-free holiday. And, the state determines which items are exempt from sales tax. Not all items are sales tax exempt. Usually, goods that are sales tax exempt are back-to-school and hurricane preparedness products. In states that have a sales tax holiday, you must sell the selected items sales tax free during the holiday.
Most states limit the maximum amount of a tax-exempt purchase. For example, a state might say a customer purchase of up to $1,000 is exempt from sales tax.
Be sure to check your state’s sales tax holiday rules.
Preparing for a sales tax holiday
Keep these three points in mind as you navigate sales tax holidays:
- Each state has its own rules for reporting sales tax exemptions. Some states require specific reporting in your accounting records while others do not.
- Depending on the state you operate your business in, you may have to charge local sales tax on certain items.
- Rules about rain checks, layaway, and gift certificates vary between states.
The following chart has the basic sales tax holiday information by state. It lists the states that have a sales tax holiday, the dates of the holidays, and the items included in the exemption.
Check with your state for specific rules, such as how to handle local sales tax and whether you have to participate.
|State||2018 Dates||Items Included and the Maximum Amount Exempt|
|Alabama||February 23-15, 2018||Severe weather preparedness items – $60 per item
Generators and power cords – $1,000 per item
|Alabama||July 20-22, 2018||Clothing – $100 per article
Computers, computer software, school computer supplies – $750 per item
School supplies – $50 per item
Books – $30 per item
|Arkansas||August 4-5, 2018||Clothing and footwear – $100 per item
Clothing accessories – $50 per item
School supplies, school art supplies, school instructional materials – No limit
|Connecticut||August 19-25, 2018||Clothing and footwear – $100 per item|
|Florida||June 1-7, 2018||Generators – $750 per item
Tarps, plastic sheeting, ground anchor systems, bungee cords, ratchet straps, radios – $50 per item
Batteries, coolers – $30 per item
Gas and diesel fuel containers – $25 per item
Portable self-powered lights (Flashlights, candles) – $20 per item
Reusable ice – $10 per item
|Florida||August 3-5, 2018||Bags, clothing and footwear, wallets – $60 per item
School supplies – $15 per item
|Iowa||August 3-4, 2018||Clothing and footwear – $100 per item|
|Louisiana||May 26-27, 2018||Hurricane preparedness items – $1,500 per item|
|Louisiana||August 3-4, 2018||Purchases of tangible personal property for non-business use – $2,5000 per item|
|Louisiana||September 7-9, 2018||Firearms, ammunition, hunting supplies – No limit|
|Maryland||February 17-19, 2018||Energy Star products – No limit|
|Maryland||August 12-18, 2018||Clothing and footwear – $100 per item|
|Mississippi||July 27-28, 2018||Clothing and footwear – $100 per item|
|Mississippi||August 31 – September 2, 2018||Firearms, ammunition, and hunting supplies – No limit|
|Missouri||April 19-25, 2018||Energy Star products – $1,500 per item|
|Missouri||August 3-5, 2018||Clothing – $100 per item
School supplies – $50 per item
Computer software – $350 per item
Computers and peripheral devices – $1,500 per item
Graphing calculators – $150 per item
|New Mexico||August 3-5, 2018||Clothing and footwear – $100 per item
School supplies – $30 per item
Computers – $1,000 per item
Computer related items – $500 per item
Book bags, backpacks, maps, globes – $100 per item
Handheld calculators – $200 per item
|Ohio||August 3-5, 2018||Clothing – $75 per item
School supplies – $20 per item
School instructional material – $20 per item
|Oklahoma||August 3-5, 2018||Clothing and footwear – $100 per item|
|South Carolina||August 3-5, 2018||Clothing, footwear, and certain accessories – No limit
School supplies – No limit
Computers, printers and printer supplies, computer software – No limit
Bed and bath items – No limit
|Tennessee||July 27-29, 2018||Clothing – $100 per item
School and art supplies – $100 per item
Computers – $1,500 per item
|Texas||April 28-30, 2018||Portable generators – $3,000 per item
Hurricane shutters and emergency ladders – $300 per item
Other emergency preparation supplies – $75 per item
|Texas||May 26-28, 2018||Energy Star air conditioners – $6,000 per item
Refrigerators – $2,000 per item
Ceiling fans, incandescent and fluorescent light bulbs, dishwashers, dehumidifiers, programmable thermostats, clothes washers – No limit
|Texas||August 10-12, 2018||Clothing and footwear – $100 per item
School supplies – $100 per item
|Virginia||August 3-5, 2018||Energy Star and WaterSense products – $2,500 per item
Clothing and footwear – $100 per item
School supplies – $20 per item
Portable generators – $1,000 per item
Gas-powered chainsaws – $350 per item
Chainsaw accessories – $60 per item
Hurricane preparedness items – $60 per item
|Wisconsin||August 1-5, 2018||Clothing – $75 per item
Computers – $750 per item
Computer supplies – $250 per item
School supplies – $75 per item
How to make the sales tax holiday work for you
Though sales tax free days are designed to benefit consumers, small business owners can benefit too. Make the most out of the sales tax holiday by trying the following tips.
Market your business
You can use the sales tax holiday to your advantage by holding special promotions. Use marketing strategies to bring in new customers and keep them coming back. Promote the items that are exempt from sales tax. You might post on social media about how you are participating in the sales tax holiday.
One way to stand out during a sales tax holiday is to absorb all sales tax at your business. When you absorb the sales tax, you pay the tax on items not exempt by the state. Be sure to check your state laws to find out if it’s legal for you to do this.
For example, in Virginia, you can absorb the sales tax on nonexempt items if you sell them with sales tax exempt items. If you are allowed to absorb the sales tax, make sure your finances can handle the business expense.
You can promote your business on a sales tax holiday by having a sale. In addition to the tax-free savings, customers will be drawn to your low prices.
To keep customers coming back after the sales tax holiday, advertise future savings that will be available. You could hold a sale the next month, create customer rewards programs for small business, or offer incentives with an email subscription.
POS systems and recordkeeping
Most POS systems can handle sales tax holidays. But, you might have to turn the sales tax override function on during the holiday. Make sure you set the overrides in your POS system before you open. When the sales tax weekend is over, don’t forget to turn the overrides off.
Recordkeeping is important during a sales tax holiday. You may have some sales that include both tax-exempt and nonexempt items. Be careful about which items you charge sales tax on. Document all tax-free sales in your accounting records.
You need to inform your employees about the sales tax holiday. Your business might be busy during the holiday. To reduce mistakes and stress, talk to employees about which items are tax exempt and what to do at the point of sale.
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This article is updated from its original publication date of 7/21/2016.
This is not intended as legal advice; for more information, please click here.