August 2020 sales tax holidays

Update August 4, 2020: Face masks qualify as exempt clothing during the Florida sales tax holiday, according to a Florida Department of Revenue spokesperson. Other states may follow Florida's lead in this, although most states specifically exclude protective clothing from the temporary exemption. 

Sales tax holidays take place in more than a dozen states in August 2020. Products temporarily exempt from sales tax during these various tax-free periods range from aprons in Arkansas to trousers in Texas, and much in between.

Sales tax holidays are a great time for consumers to save the sales tax on purchases of necessary items like clothing and school supplies. During tax-free periods, state sales tax and sometimes local sales taxes don’t apply to qualifying purchases. Unless a specific exception applies, every company that’s registered to do business and sells qualifying goods in a state must abide by the state’s sales tax holiday rules.

In some states (e.g., Oklahoma and South Carolina), applicable local sales taxes must be charged during sales tax holidays. In other states (e.g., Missouri), local governments choose whether to participate in sales tax holidays at the local level. Businesses that sell qualifying items need to know where local sales tax applies and where it doesn’t.

For retailers, sales tax holidays can create a lot of work for little reward. While they can help drive sales, evidence suggests they shift sales to different times rather than generate new sales. They can also lead to unexpected expenses. Brick-and-mortar stores often find it necessary to bring in extra staff during sales tax holidays, due to crowds. Ecommerce sellers may also find it necessary to increase staff during tax-free times, to handle customer service issues.

Furthermore, sales tax compliance can engender additional costs. Retailers need to ensure point-of-sale systems are properly programed to temporarily suspend the sales tax on qualifying items, like mittens in Maryland.

When the sales tax holiday is complete, tax must be charged once again. And tax must continually be applied to sales of items that don’t qualify, like fishing boots or football pads in Florida.

• Arkansas back-to-school sales tax holiday, August 1–2, 2020
• Connecticut clothing and footwear sales tax holiday, August 16–22, 2020
• Florida back-to-school sales tax holiday, August 7–9, 2020
• Iowa clothing and footwear sales tax holiday, August 7–8, 2020
• Maryland Shop Maryland Tax-Free Week, August 9­­–15, 2020
• Massachusetts sales tax holiday,  August 29–30, 2020 
• Mississippi Second Amendment weekend, August 28–30, 2020 
• Missouri back-to-school sales tax holiday, August 7–9, 2020
• New Mexico back-to-school sales tax holiday, August 7–9, 2020
• Ohio sales tax holiday, August 7–9, 2020
• Oklahoma annual holiday, August 7­–9, 2020
• South Carolina annual sales tax holiday, August 7­–9, 2020
• Tennessee restaurant sales tax holiday, August 7–9, 2020
• Texas annual sales tax holiday, August 7–9, 2020
• Virginia annual sales tax holiday (three-in-one sales tax holiday), August 7–9, 2020

Mississippi’s sales tax holiday for clothing and school supplies ends August 1, 2020. Tennessee’s tax-free period for clothing, electronics, and school supplies ends August 2, 2020.

Sales tax holidays complicate sales tax compliance in surprising ways, especially for ecommerce sellers making sales (and collecting sales tax) in multiple states. States now have the authority to require businesses with no physical presence in a state to collect sales and use tax under economic nexus laws. As a result, many out-of-state businesses have an obligation to comply with 2020 sales and use tax holidays.

For example:

• Tax-free periods typically start at 12:01 a.m. and conclude at 11:59 p.m., but some start and end at midnight
• Many state sales tax holidays run August 7–9, but the tax-free period in Iowa takes place August 7–8, and Maryland’s starts August 9
• Most states have price restrictions, and these vary by state

Discover more details at 2020 sales tax holidays.