Tax Tip of the Week | No. 418 | A Closer Look at the Upcoming Sales Tax Holiday

Tax Tip of the Week | Aug 2, 2017 | No. 418 | A Closer Look at the Upcoming Sales Tax Holiday

Ohio shoppers have probably started to become accustomed to this “back to school” seasonal sales tax holiday, and they certainly won’t be disappointed this year. The Ohio sales tax holiday will begin at 12:01 a.m. Friday, August 4 and end at 11:59 p.m. on Sunday August 6, 2017. Expect heavier than normal traffic at some of your favorite stores, though hopefully it won’t be as raucous as a typical Black Friday in November.The intention of the sales tax holiday is to boost sales while giving taxpayers a break on back to school items such as pens, notebooks, jeans and shoes. During the 2015 sales tax weekend, Ohio consumers saved $3.3 million in taxes on $46.75 million worth of back-to-school purchases, according to research by the University of Cincinnati Economics Center, with the average family saving about $40.During this time period only, you can buy certain items and not pay any sales or use tax. Those items fall into the following categories: an item of clothing priced at $75 or less; a school supply item priced at $20 or less; and an item of school instructional material priced at $20 or less.Unfortunately, items used in a trade or business are not exempt under the sales tax holiday, so you will not be able to take advantage for your business.These are a few of the questions we are asked most frequently about the sales tax holiday:Can retailers/vendors choose not to participate in the sales tax holiday? No. The sales tax holiday is set by law and vendors must comply.Can multiple qualifying items be purchased in a single tax-exempt transaction? Yes. There is no limit on the amount of the total purchase. The qualification is determined item by item. So, if you purchased two pair of pants, a pair of shoes and a jacket and each item cost $50, the total purchase of $200 would be tax exempt.What clothing items qualify? For the sales tax holiday “clothing” is defined as all human wearing apparel suitable for general use and covers more than you might expect. Traditional items such as shirts, pants, skirts, sweaters, dresses and shoes are included, but so are disposable diapers, formal wear and wedding apparel. For a full list of clothing items that qualify visit www.tax.ohio.gov. Items purchased to be used in businesses or trades are not eligible for the sales tax holiday.If the selling price of an item of clothing is $90, is the first $75 exempt from the sales tax? No. The exemption applies only to items selling for $75 or less. Therefore if an item of clothing sells for more than $75, tax is due on the entire selling price. In addition, retailers cannot split items that are normally sold together in order to fall under the sales price threshold. In other words, if the store is selling a pair of shoes for $100, they cannot sell the shoes separately at $50 each.What qualifies as a school supply? “School supplies” are very specifically defined and include items like binders, book bags, calculators, composition books and notebooks. You can find a complete list of qualifying items at the Ohio Department of Taxation website. Items not specifically listed are subject to sales and use tax.How are coupons and discounts handled? If a retailer offers a discount to reduce the price of an eligible item to $20 or less (school supplies) or $75 or less (clothing), the item will qualify for the exemption. This applies to all discounts even if a retailer’s coupon or loyalty card is required to secure the discount.Does the exemption apply to mail, telephone, e-mail and internet orders? Yes. Qualified items sold to consumers by mail, telephone, e-mail, or internet do qualify for the sales tax exemption if the consumer orders and pays for the item and the retailer accepts the order during the exemption period for immediate shipment, even if delivery is made after the exemption period.So make your list, check it twice, and schedule some time the first weekend in August to hit the stores!You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.Rick Prewit – the guy behind TTW…until next week.