Mark Wilhelm - The Recovering Accountant

Remember back when you were a small child, and went to the amusement park?  Once you were old enough to realize the kiddy rides were for babies, all you could think about was getting to ride on the roller coaster.

Unfortunately, my desire for the thrill of the coaster greatly exceeded my height. I would excitedly stand in line waiting until I could go on that glorious roller coaster ride (it was the named the Blue Streak) and it was all I could think about for weeks leading up to the annual trip to the park. Once I got there, they stood me up against the threshold (it was a picture of a smiling cartoon dog), drew a line and stepped back—I was just under the requisite line. No ride for me (but that damn dog kept smiling, and it just pissed me off).

In the heyday of textile manufacturing, the great Northeastern states, in all their wisdom, developed a whole series of special caps and thresholds regarding sales tax and textiles (clothing). I suspect lobbyists pleaded their causes with some of the great states at that time and gained favor, landing us with a legacy of sales tax complexity that was a big deal back then, but now, it’s a different story.

New York State / New York City

If a retailer sells apparel in the state of New York, caps and thresholds are one of the challenges that they face in managing the complexities of sales tax. In New York State, if you purchase an article of clothing and the item costs less than $55.00, there is no state sales tax applied. Great, right? As long as you can find an article of clothing less than $55.00 in New York, you are good and making a tax-exempt purchase…maybe.

New York State sales tax is exempt up to $55.00. In addition, any applicable Metropolitan Commuter Transportation District (MCTD) tax is exempt.  However, the locals (counties or cities) can do what they want.  The local county tax might apply to that sale depending on which county you are in. So, that item for $24.00 might be sales tax-exempt for state sales tax and the MCTD tax, but the county is going to apply their percentage to the purchase, so it isn’t entirely tax-free.

Now, let’s take this up a notch and head to New York City. In New York City, the $55.00 state threshold applies, so does the MTCD sales tax exemption, but the city decided to go one better—it exempts sales of a single item priced up to $110.00.

So…..  it works this way for the purchase of a single shirt in the Big Apple….

$0.00 to $54.99 – No state sales or MCTD taxes and the NYC sales tax doesn’t apply.

$55.00 to $109.99 – Still no NYC sales tax,  but the merchant is required to charge the State tax and the MCTD sales tax.

$110.00 and beyond – charge all the sales tax!

But that is only in New York City. If you go to Schenectady, then the following applies:

$0.00 to $54.99 – No state sales tax, but Schenectady County chooses to charge its sales tax, and there isn’t a MCTD tax for the consumer to worry about (as long as the seller knows that…).

$55.00 and beyond – All taxes are applicable.

How about Poughkeepsie?

$0.00 to $54.99 – No state sales tax, no MCTD (Dutchess County Transit District) tax, but Dutchess County chooses to charge its sales tax.

$55.00 and beyond – All taxes are applicable.

If that wasn’t difficult enough, you might have noted that I mentioned this is a single item tax.  If I buy two shirts, priced @ $35.00 each, I have a total purchase price of $70.  The single item price is of course $35.00, so this purchase falls under the $55.00 threshold.  If this purchase is made in NYC, the entire amount is exempted from sales tax. Everyone else applies the sales tax to each single item purchase in the total.

So, you get all of the frustration of the various clothing thresholds (or that damn smiling cartoon dog with his outstretched paw hovering about a ½ inch over my head), and you get all the stomach churn without getting the thrill of the roller coaster ride.

Next time, we’ll travel up the corridor to Massachusetts and the fun world of how Massachusetts taxes clothing.