REMINDER: Back To School Sales Tax Holiday Starts Today
Shoppers they can save money on certain items priced for less than $100 during the state’s annual sales tax holiday.
(AUSTIN) — Texas Comptroller Glenn Hegar reminds shoppers they can save money on certain items priced for less than $100 during the state’s annual sales tax holiday.
This year’s Sales Tax Holiday is Aug. 11 – 13. As in previous years, the law exempts most clothing, footwear, school supplies and backpacks priced under $100 from sales and use taxes, which could save shoppers about $8 on every $100 they spend.
“As families all over our state prepare to send their children back to school, we hope folks take advantage of this opportunity to get the supplies they need and save some money in the process,” Hegar said. “As the father of three young children, I know how these expenses can add up. This event provides Texas families with some relief from state and local sales taxes.”
This year, shoppers will save an estimated $92 million in state and local sales taxes during the sales tax holiday.
The dates for the sales tax holiday are set by the Legislature, and has been an annual event since 1999.
Subject to the criteria explained below, all sales of qualifying items made during the holiday period qualify for the exemption, including items sold online, or by telephone or mail. Lay-away plans can be used again this year to take advantage of the sales tax holiday.
• Clothing and Footwear •
Retailers are not required to collect state and local sales or use tax on most footwear and clothing that are sold for less than $100 during the holiday. Exemption certificates are not required. The exemption applies to each eligible item that sells for less than $100, regardless of how many items are sold on the same invoice to a customer. For example, if a customer purchases two shirts for $80 each, then both items qualify for the exemption, even though the customer’s total purchase price ($160) exceeds $99.99.
The exemption does not apply to the first $99.99 of an otherwise eligible item that sells for more than $99.99. For example, if a customer purchases a pair of pants that costs $110, then sales tax is due on the entire $110.
The exemption also does not apply to sales of special clothing or footwear that the manufacturer primarily designed for athletic activity or protective use and that is not normally worn except when used for the athletic activity or protective use for which the manufacturer designed the article. For example, golf cleats and football pads are primarily designed for athletic activity or protective use and are not normally worn except for those purposes; they do not qualify for the exemption. Tennis shoes, jogging suits and swimsuits, however, are commonly worn for purposes other than athletic activity and thus qualify for the exemption.
The sales tax holiday exemption does not extend to rental of clothing or footwear; nor does it apply to alteration (including embroidery) or cleaning services performed on clothes and shoes. Additionally, tax is due on sales of accessories, including jewelry, handbags, purses, briefcases, luggage, umbrellas, wallets, watches and similar items.
• Backpacks •
Backpacks priced under $100 sold for use by elementary and secondary students are exempt during the sales tax holiday. A backpack is a pack with straps one wears on the back.
The exemption includes backpacks with wheels, provided they can also be worn on the back like a traditional backpack, and messenger bags.
The exemption does not include items that are reasonably defined as luggage, briefcases, athletic/duffle/gym bags, computer bags, purses or framed backpacks. Ten or fewer backpacks can be purchased tax-free at one time without providing an exemption certificate to the seller.
• School Supplies •
Texas families also get a sales tax break on most school supplies priced at less than $100 purchased for use by a student in an elementary or secondary school.
• Purchases of School Supplies Using a Business Account •
Persons buying qualifying school supplies during the holiday are not required to provide an exemption certificate – with one exception. If the purchaser is buying the items under a business account, the retailer must obtain an exemption certificate from the purchaser certifying that the items are purchased for use by an elementary or secondary school student.
“Under a business account” means the purchaser is using a business credit card or business check rather than a personal credit card or personal check; being billed under a business account maintained at the retailer; or is using a business membership at a retailer that is membership based.
• Layaways & Rainchecks •
- Layaways
A sale of a qualifying item under a layaway plan qualifies for exemption if the customer places the qualifying merchandise on layaway during the holiday or makes the final payment during the holiday. See Rule 3.365(i).
- Rainchecks
Eligible items that customers purchase during the holiday with use of a rain check qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check by a seller during the holiday period will not qualify an eligible item for the exemption if the item is actually purchased after the holiday is over even if the rain check is presented at the time of purchase. See Rule 3.365(j).
• Prohibited Advertising •
A word of caution: If you sell items that do not qualify for the exemption, you may not advertise or promise that you will pay your customers’ sales tax. You are prohibited from advertising that you will not collect sales tax on items that do not qualify, but you may advertise that tax is included in the sales price of the taxable items that you sell. See Tax Code Section 151.704 for more information.
• Reporting Requirements for Sellers •
•Reporting Tax
If you sold qualifying clothing or footwear tax-free during this year’s sales tax holiday, don’t include receipts from those sales in Taxable Sales (Item 2) of your sales tax return. If you were not required to and did not charge the sales tax on certain clothing and footwear, you are not required to remit any tax on these items. If you collected tax, however, then you must send it to the state.
•Example 1
During the three-day holiday, Fine Clothing sold a shirt for $50.00 and did not collect tax. Fine Clothing will report the $50.00 in Total Sales (Item 1), but will not include the $50.00 in the Taxable Sales column. This shirt qualifies as a tax-free holiday item and no tax is due.
Fine Clothing sold ten $20.00 shirts ($200.00) and ten $5.00 wallets ($50.00) during the holiday. When Fine Clothing completes its sales tax return, the amount shown in Total Sales will be $250.00 (all sales made during your reporting period). The amount shown in Taxable Sales will be $50.00 (for the wallets only).
•Example 2
Fine Clothing sold ten $50.00 shirts and ten $150.00 suits. Fine Clothing advertised that tax was included in the sales price of clothing over $100.00. Therefore, tax was included in the $1500.00 Fine Clothing received for the suits.
When computing sales tax on its return, Fine Clothing should back the tax out before it computes the amount shown as Total Sales.
To do this, Fine Clothing should take the total amount of sales in which tax was included ($1500.00) and divide that amount by one plus the tax rate ($1500.00/1.0825 = $1385.68). The difference between the $1500.00 and the $1385.68 is the tax of $114.32 included in the charge to the customer. The amount of $1385.68 is the amount shown in Item 1 for the taxable suits. Fine Clothing should add this to the $500.00 for the tax-free shirts for a total of $1885.68 listed in Item 1. (Round to $1886. Remember to round sales to whole dollars before entering sales amounts on your return.) Fine Clothing would enter $1385.68 in Taxable Sales, Item 2, (Round to $1386). Then Fine Clothing should send the $114.32 to the Comptroller with its sales tax return.
•Example 3
A shirt regularly sells for $100.00, but Fine Clothing offers an 8.25 percent discount* ($8.25) on the selling price of all clothing items. The cost of the shirt is now $91.75, and no tax is due. Fine Clothing should include the $91.75 in Total Sales, but not in Taxable Sales.
A shirt regularly sells for $200.00. Applying the 8.25 percent discount* of $16.50, the price of the shirt is $183.50, and is taxable. The customer pays $198.64 (sales price and tax). Fine Clothing should report $183.50 in Total Sales and Taxable Sales, and remit the $15.14 in tax with its sales tax return.
A shirt may regularly sell for $108.98, but with the 8.25 percent discount of $8.99, the shirt sells for $99.99. This $99.99 shirt is not taxable to the customer. Fine Clothing will report $99.99 in Total Sales, but not Taxable Sales. (Even though when this individual price is rounded to the nearest dollar the amount is $100.00, it should never be included in taxable sales.) However, Fine Clothing sells a shirt for $108.99, but with the 8.25 percent discount of $8.99, the sales price is $100.00. This shirt is taxable to the customer. Fine Clothing should report this $100.00 in both Total Sales and in Taxable Sales. (Remember to round your sales to whole dollars before entering sales amounts on your return.)
*Reminder – a retailer can advertise a discounted sales price equal to the amount or rate of tax but cannot advertise that they will not collect tax or that they will pay the tax to the state on behalf of their customers on sales of non-qualifying items. See Prohibited Advertising.
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