Sales tax holidays – or a tax free weekend, depending on where you live – are welcome reprieves for consumers, looking to save money when they can. But retailers’ tax departments might not be as excited.
It takes careful monitoring of all the jurisdictions where businesses have sales, and an extra complexity has been added with economic nexus requirements following South Dakota v. Wayfair, Inc. Accurately applying sales tax before, during and after a sales tax holiday can take a lot of time, energy and resources. This can be especially tricky as local areas can send a notification of participation just days before a sales tax holiday begins.
Online retailers with a diverse product portfolio, and with sales spanning the country, will truly feel the extra burden that can come with sales tax holidays. For example, there is no uniformity in state-to-state exemptions. If and when a holiday has a similar focus (e.g. “Back to School”), online retailers must familiarize themselves with individual state rules to stay compliant.
But which states have a sales tax holiday? What products are eligible for a holiday exemption?
Alabama
Severe weather preparedness (February 26-28)
Back to School (July 16-18)
Arkansas
Back to School, August 7-8
Connecticut
Clothing and footwear, August 15-21
Florida
Disaster preparedness (May 28-June 6)
Freedom Week (July 1-7)
Back to School (July 31-August 8)
Iowa
Clothing and footwear (August 6-7)
Louisiana
Second Amendment (September 4-6)
Massachusetts
All-Inclusive (August 14-15)
Maryland
Energy Star (February 13-15)
Clothing and footwear (August 8-14)
Mississippi
Back to school (July 30-31)
Second Amendment (August 27-29)
Missouri
Energy Star (April 19-25)
Clothing and footwear (August 6-8)
New Mexico
Back to school (August 6-8)
Ohio
Back to school (August 6-8)
Oklahoma
Clothing and footwear (August 6-8)
Puerto Rico
School supplies (January 8-9)
Back to school (July TBD)
South Carolina
Back to school (August 6-8)
Tennessee
Gun Safety (July 1, 2021 – June 30, 2022)
Back to school (July 30-August 1)
Prepared Food (July 30-August 5)
Texas
Emergency preparedness (April 24-26)
Energy Star & WaterSense (May 29-31)
Back to school (August 6-8)
Virginia
Back to school, Emergency Preparedness and Energy (August 6-8)
West Virginia
Back to school (July 30 – August 2)
Sales tax holidays can be a headache for retailers, regardless of when they occur. Many tax departments file sales taxes monthly or quarterly, though some may file annually or semiannually. Retailers’ tax and IT departments must remain vigilant and properly adjust their systems to correctly charge tax on every transaction. They will also need to account for changes should they be audited later. Retailers need to be able to update systems quickly, efficiently and accurately, ensuring that the correct sales tax holiday rates are only in place when they should be.
Sales associates also have to know sales tax holiday details so they can process each transaction correctly. Overall, sales tax holidays can help consumers save, but cost retailers a lot of time and energy in ensuring taxes are accurately charged. Having an automated sales and use tax system can be extremely beneficial in helping to manage these complexities.