For business owners in most states, collecting and remitting sales tax is part of the job description. But on select dates throughout the year, your customers can take advantage of a sales tax holiday.
As a business owner, you must know about and adjust your collections process for sales tax holidays.
Read on to learn what is a sales tax holiday, 2019 dates by state, and how you can maximize your earnings during a holiday.
Recap on sales tax
Sales tax is a pass-through tax that businesses in most states collect from customers at the point of sale. The tax is a percentage of the customer’s bill tacked on to their purchase total.
Although businesses don’t contribute to sales taxes, they are responsible for remitting them to the proper government agency.
Sales tax laws by state vary. States have different rates, laws on sales tax nexus, and sales tax methods (e.g., destination- vs. origin-based). And, not all states have sales tax.
The following states do not have a state-mandated sales tax:
- New Hampshire
Hawaii and New Mexico also do not have a sales tax. However, they have similar taxes known as general excise and gross receipts taxes. And, New Mexico has a sales tax holiday, exempting customers from the gross receipts tax.
What is a sales tax holiday?
A sales tax holiday is a short-term exemption from state sales tax. During a sales tax holiday, you do not collect sales tax. This period could be a tax-free day, tax-free weekend, or an entire week, depending on the state you operate in. Keep in mind that not all items are sales-tax exempt.
Not all states have a sales tax holiday. And, participating states have different rules for exemptions.
State rules can vary in regards to:
- The sales tax holiday dates
- Time-span of the tax-free holiday (e.g., day vs. week)
- Which items are exempt from sales tax
- The maximum amount of a tax-exempt purchase
If you do business in a state with a sales-tax-free weekend, week, or day, you need to know the rules.
Preparing for a sales tax holiday
Before your business can participate in a no sales tax day, weekend, or week, you must prepare. Make sure you know:
- Your state’s sales tax rules
- Your state’s rules for reporting sales tax exemptions in your accounting books
- Whether you must charge local sales tax on certain items
- Rules about rainchecks, layaway, and gift certificates
- Whether you need to participate
Remember, not all states have sales tax holidays. And, not all states have sales tax to begin with.
Sales tax holiday by state
Need help keeping track of your state’s tax-free weekend, week, or day? Use the chart below to find out which states have a sales tax holiday in 2019.
|State||2019 Dates||Items Included and Maximum Amount Exempt|
|Alabama||July 19 – 21||School & Art Supplies: $50 (per item)
Clothing: $100 (per item)
Computers and School-related Electronics: $750 (per item)
Books: $30 (per book) / $50 (per textbook)
|Arkansas||August 3 – 4||School & Art Supplies: No maximum
Clothing: $100 (per item)
Clothing Accessories: $50 (per item)
|Connecticut||August 18 – 24||Clothing & Footwear: $100 (per item)|
|Florida||May 31 – June 6||Hurricane Preparedness Items|
|Florida||August 2 – 6||School Supplies: $15 (per item)
Clothing, Footwear, & Accessories: $60 (per item)
Computers & Accessories: $1,000 (per item)
|Iowa||August 2 – 3||Clothing & Footwear: $100 (per item)|
|Maryland||August 11 – 17||Clothing & Footwear: $100 (per item)
Backpack: $40 (per backpack)
|Maryland||February 15 – 17 (2020)||Energy Star Products: No maximum|
|Massachusetts||August 17 – 18||Purchases under $2,500 (excluding tobacco, marijuana, alcohol, cars, motorboats, telecommunications, gas, steam, and electricity)|
|Mississippi||July 26 – 27||Clothing, Footwear, & School Supplies: $100 (per item)|
|Missouri||August 2 – 4||Clothing: $100 (per item)
School Supplies: $50 (per purchase)
Computer Software: $350
Personal Computers & Computer Peripheral Devices: $1,500
Graphing Calculators: $150
|New Mexico||August 2 – 4||Clothing or Footwear: $100 (per item)
Computer Hardware: $500
School Supplies: $30 (per item)
|Ohio||August 2 – 4||Clothing: $75 (per item)
School Supplies: $20 (per item)
|Oklahoma||August 2 – 4||Clothing or Footwear: $100|
|South Carolina||August 2 – 4||Clothing, Accessories, and Footwear; School Supplies; Computers, Software, and Printers; Bed and Bath Supplies: No limit|
|Tennessee||July 26 – 28||Clothing: $100
School & Art Supplies: $100
|Texas||August 9 – 11||Clothing & Footwear: $100
School Supplies: $100
|Virginia||August 2 – 4||Clothing & 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)
Other Specified Hurricane Preparedness Items: $60 (per item)
Energy Star and WaterSense Products: $2,500 (per item)
Keep in mind that the sales tax holiday generally begins at midnight or 12:01 a.m. on the start date and ends at 11:59 p.m. or midnight on the end date.
Again, sales tax holidays may not exempt you from local sales tax. Check with your state and locality for more information on sales tax holidays.
Making the sales tax-free weekend work for you
Although sales tax-free days are designed to benefit consumers, small business owners can benefit, too. But, you must ensure you stay on top of your responsibilities.
Try the following tips to make the sales tax holiday work for your business.
1. Market your business
If there’s a sales tax holiday in your state, let your customers know you are participating.
Promote the items that are exempt from sales tax in your:
- Email marketing campaigns
- Social media materials
- Print marketing
You can also hold special promotions to use the sales tax holiday to your advantage. In addition to the tax-free savings, you may also offer discounts to draw customers in.
If you want to really make your business stand out, you can absorb all sales tax. This means that you pay taxes on items the state does not include in its sales tax holiday. Before absorbing sales tax, check with your state to verify it’s legal.
During a tax-free weekend, week, or day, be sure to collect customer information and add them to your customer base. That way, you can advertise future specials, let customers know what’s new, or create customer loyalty programs for small business.
2. Get employees on the same page
When customers are expecting a sales-tax-free shopping experience, the last thing they want is a confused employee telling them differently.
Make sure all your employees are aware of the sales tax holiday dates and rules. Accidentally collecting sales tax from customers can lead to distrust. Not to mention, you’ll probably have to do some extra work to reverse the sale if customers realize you charged them after they pay.
Inform your employees about the sales tax holiday beforehand. 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.
3. Update your POS systems
Most POS systems can handle sales tax holidays. But, you may need to manually enter the programming information into it (e.g., date and times to not charge sales tax).
If you use a POS system, make sure you program it before you open during the tax-free day, weekend, or week. And, don’t forget to change the system back or set an expiration for the tax-free period.
4. Keep clear and state-compliant records
Although you don’t get to keep collected sales tax during the year, you are responsible for recording it in your books.
Sales tax accounting records are critical when you go to remit the taxes to your state or local government. You must review your records to make sure you remit the correct amounts.
Sales tax accounting becomes especially important (and tricky) during sales tax holidays. You may have some sales that include both tax-exempt and nonexempt items. As a result, you must be careful about which items you charge sales tax on. Back up your records in your accounting books.
Do you need a simple way to record your small business’s transactions? Check out Patriot’s accounting software to manage your books. And, we offer free, U.S.-based support. Start your self-guided demo now!
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This article has been updated from its original publication date of 7/21/2016.
This is not intended as legal advice; for more information, please click here.