Sales tax seems to find a way to be at its busiest when we’re out trying to relax. While you may take time off for vacation, commerce does not, and retailers face a unique set of sales tax challenges in late summer. Here are three summer sales tax tips to help you stay compliant in the season of swimwear, sunburns, and sales tax holidays.
Your store may be getting a ton of themed merchandise for Halloween and Thanksgiving, whether it be decorations, costumes, or new food items. Make sure you’re ready to address the influx of product ahead of time. Such seasonal items need a more thorough examination than their year-round counterparts since they may be taxed differently depending on how you market them.
For example, today one of my coworkers was going through Halloween inventory and asked if a pair of “tattered zombie” tights was considered clothing or costume (the two are taxed at different rates). “I’d wear them,” I said, adhering to many states’ definition of clothing involving words like “appropriate for everyday use.”
If you sell in West Virginia, be mindful that the tax on food and food ingredients has been lifted this summer. While prepared meals, vending machine food, and soft drinks are still taxed, many food items have changed tax status beginning in July. That could affect thousands of items in your inventory, so it’s imperative to make the change, lest your sunbathing be interrupted by phone calls from angry customers in the Mountain state.
Back to School Last Hurrah
School sales tax holidays are coming up, mostly in the month of August. Seventeen states have sales tax holidays on clothing and/or school supplies. Later this week, we’ll talk more about the specifics of these holidays, but here is a list of states in which they occur.
Additionally, Puerto Rico has recently instituted a new sales tax holiday on school supplies. On top of the holiday, notebooks and textbooks are now exempt year round. The law was issued July 1st. If you’re vacationing in Puerto Rico, take advantage and stock up on legal pads. If you’re selling there, make sure you’ve addressed the changes.
It may seem like a lot to do, but if you plan ahead for the summer tax heat then you can avoid getting burned by sales tax errors and audit penalties.