Will's Whiteboard: Making Sense of Sales Tax Holidays
- Sales and Use Tax
- Jul 10, 2013 | Will Frei
For consumers, sales tax holidays mean tax-relief on items like emergency equipment and back to school supplies. Yet, for retailers, sales tax holidays mean the added stress of managing different tax rules and rates for a portion of their inventories. The stress grows exponentially for businesses that have to manage these holidays in multiple states. In 2012 alone, there were over 2,000 state sales tax holiday rules in the U.S. for retailers to keep straight.
Watch this video to learn the four core elements of sales tax holidays that businesses need to track in order to stay compliant during the holiday season.
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Hi, welcome to Will’s Whiteboard I’m Will. You may be wondering why I’m dressed like I’m going to play golf. That is because we going to talk about holidays today, specifically sales tax holidays. Every year there are periods of time in certain states were they waive the sales tax in order to promote economic growth in a certain sector, whether it disaster preparedness equipment or energy saving products or back to school supplies (those are some common ones). The thing is business need to pay attention to all the rules that go along with these sales tax holidays, so they can have the right rates during these times. Just out of curiosity, how many state rules do you think there was last year for sales tax holidays. Let’s put up a little quiz here. Do you think there were 20? DO you think there were over 200 or you think there were over 2000? I won’t give you the answer to that right away, but we come back to that.
So let’s take a look how sales tax holidays work and what you have to pay attention to. Businesses essentially need to pay attention to four items when it comes to sales tax holidays. Item number one, you need to pay attention to rates. During a sales tax holiday like I mentioned, the rate is either going to be lower or completely disappear. So you need to adjust your register or financial application during that time to reflect the rate change. Number two is exceptions. Many sales tax holidays certain exceptions or different rules about things like coupons, layaway, or special types of transactions. You need to know these rules and when a sales tax rate is going to apply. Number three is dates. This is obviously an important one. When is the holiday happening? In other words when you need to adjust your rates to the holiday and when you need to adjust them back to what they are normally. Finally, you need to pay attention to changes. States are changing their rules about sales tax holidays from year to year. In fact some states make changes up to the last minute. Oftentimes, that has to do with the fact that some states allow local jurisdictions to choose whether or not to participate in the sales tax holiday, this makes things really complex. For example, in 2012 in the city Mobile, Alabama didn’t announce it was going to participate in the holiday until a month before the holiday started. So it can be kind of tricky to keep up on who is participating and what rates to actually charge your customers. Those are the components you need to watch out for.
So, what is the answer to the quiz? Well it turns out that last year in 2012, there were over 2,000 state sales tax holiday rules that business had to comply with. Now that over the whole US, so that in all states with holidays, but still it a massive amount. This could be real tricky for business to get a handle on and do correctly. So because of that we’ve gather all the sales tax holidays that are happening this year and we put them into one resource for you and we going to give you that URL here on the screen in a second. So just follow that URL if you want to see information about all the states, rates, dates, and changes and get it all in one place so you stay up to speed on what needs to be done. Thanks very much, see you next time.