What does wedding season have to do with sales tax? Depending on the products and services your business offers, there could be more involved than you think. Find out if your organization is prepared for these sales tax considerations connected with the upcoming wedding season.
According to a study done by The Knot, 80% of weddings take place from May to October, meaning that wedding season is quickly approaching. Your organization may start to see an increase in wedding-related sales as we head into the busiest months for nuptials. We’ve gathered some of the topics your customers will be considering as they plan for their big day, and the sales tax implications they may have on your business.
If you’re a retail store with locations in numerous states, are you confident that your transaction systems are accurately calculating sales tax? For example, in Connecticut “luxury clothing” costing more than $1,000 is subject to a special luxury tax rate of 7.75%. However, in Pennsylvania most clothing is exempt from sales tax – but formal wear is taxable.
Perhaps you are part of the growing designer rentals industry. Tuxedo rentals have been around for ages, but recently some brides have stopped purchasing their gowns outright and are instead opting for rentals from designers they had previously been unable to afford. Taxes on clothing rentals can be as hard to manage as sales tax in some states. Take Delaware for example – while there isn’t a sales tax on clothing, there is a tax for clothing rentals. Incorporating a tax engine that ensures accurate real time tax calculations can help ensure compliance throughout the wedding season.
Online registries have become increasingly popular. Wedding guests no longer have to buy dining sets and linens in stores. It’s now as simple as clicking “buy now” and having the goods shipped directly to the newlyweds. Can your ecommerce site quickly account for the varying rates where shoppers will be shipping all of those wedding presents. Even though the shopping process has become easier, the sticky tax situations still remain.
Additionally, does your business have the ability to bundle shipping and handling charges, and are both taxable? Perhaps you sell a product that’s on a registry, and the newlyweds return it. Does your sales tax software keep up with regulatory requirements related to refunds? Depending on the processing time of the return, you may need to file an amendment in the next period. Some states, like Connecticut, don’t return sales tax to the consumer after 90 days of purchase, and it’s your responsibility to keep track of the timeline.
Though the “three months salary” rule of thumb isn’t necessary when it comes to ring purchases, Americans spend an average of $3,756 on engagement rings. Many consumers watch for sales tax holidays before buying rings. Do you know whether or not the states in which you operate have a sales tax holiday? Or for what types of products? Arkansas, Connecticut and Iowa all have sales tax holidays, but only Arkansas provides an exemption for jewelry sales. Keeping track of the ever-evolving rates, rules and sales tax holiday changes shouldn’t halt your business. The right partner can keep pace with your current business needs and has the ability to scale as your business grows.
When it comes to sales tax (and weddings) you only have one chance to get it right, talk to one of our sales tax experts.