Many states across the nation have adopted some form of tax-free holiday. The sales tax holidays are designed to offer relief to taxpayers by providing a temporary sales tax exemption on certain goods during a specific time period.
State revenue statistics have shown retailers can have a dramatic increase in sales during the holiday, over the previous year's sales. This is why it is important retailers are well informed and prepared to handle their state's sales tax holiday.
What You Need to Know
The rules and regulations governing the Sales Tax Holiday vary with each state. Be sure you have the facts on the following:
- Understand which items are exempt from sales tax.
- Verify which day(s) are exempt in your state.
- Does the holiday apply to local taxes as well?
- Does your state provide a credit for any cash register reprogramming?
- How should you report the taxable and non-taxable sales?
Preparing for the Sale
Check with your state to see if they are holding a seminar to further explain the sales tax holiday. These clinics generally offer retailers advice for accounting, signage and point of sale information relating to the event.
- Determine how you will ring up transactions and if necessary, program a tax-exempt key.
- Take advantage of the dates as a promotional event and use it as a selling point.
- Like any sale, be sure you have enough merchandise, change and staff available.
Another way retailers can take advantage of the holiday is to absorb the tax on all merchandise and have a store-wide tax-free event. The idea is that the increase in sales will offset the tax payments. Be sure your state has no restrictions on this strategy. Call your state revenue office with any questions you may have before the sales tax holiday.
