A few states south of the Mason-Dixon line have announced summertime sales tax holidays. For consumers, especially those with school aged children, the holidays are an irresistible chance to make school related purchases. For retailers, the holidays represent a rare boost in sales of hard items in the middle of the hot summer. However, those same retailers face unique sales tax compliance challenges.
Here are links related to some upcoming holidays:
South Carolina exempts some clothing, school supplies and computers beginning 12:01 a.m. on the first Friday in August and ending at twelve midnight the following Sunday. See the SC DOR exemption list here.
Tennessee similarly exempts some school related items, clothing and computers beginning 12:01 a.m. on the first Friday in August and ending at 11:59 p.m. the following Sunday. See the TN DOR exemption list here.
North Carolina exempts some school supplies, clothing, computers and others stuff between 12:01 a.m. on the first Friday in August and 11:59 p.m. the following Sunday. See the NC DOR exemption list here.
Say, aren’t all these holidays cool? The states just give vendors a list of exempted items and voila, tax free, trouble free, win-win-win, right?
Well, not exactly, we’ll leave the gritty sales tax compliance details to the folks who regularly do business in Dixie. However, for the sake of doing what we love to do around here, here are just a few of the compliance hurdles the holidays bring to the fore:
In SC, the penalty for taxing an item intended to be exempt can be the revocation of a vendor’s license (from the SC DOR FAQ):
“Can retailers elect not to participate in the “sales tax holiday” and collect the sales tax from their customers on eligible items during the three days of the “sales tax holiday?”
No. Retailers may only “pass on” to their customers sales taxes that are legally due. The department may revoke any and all licenses issued by the department and held by a retailer if the retailer passes on sales taxes that are not legally due. ”
In Tennessee, the holiday applies only to items under $100 for clothes and school supplies, $1500 for computers.
Florida’s exemption applies to clothing under $50, but only school supplies under $10.
Wait, this is getting a little more complicated…
In North Carolina, the maximum that an item of clothing can cost to be eligible is $100. Sports Equipment must be less than $50. Computers must be less than $3500. Computer Supplies must be less than $250. School Instructional materials must be less than $300.
Finally, lawmakers in Virginia gave vendors a break from the complexity, so school supplies under $20 are eligible, while clothing gets a $100 threshold.
Listen, we won’t even get into the vague lists of exempted products, or what exactly is a school supply, or when is a sale a sale, or even when a sale occurs in one time zone that is under the holiday to a customer that is too late or too early by an hour.
The take away? Sales tax holidays are a favored tool of politicians in catering to certain pressures, so they aren’t going anywhere soon.
Oh, and those holidays are anything but a vacation for vendors concerned with effective, accurate sales tax compliance.