Sales Tax Holiday 2011 is Underway

This post comes a little late, but we are right in the middle of Sales-Tax-Holiday Season! Many states had their sales tax holidays this past weekend, but Connecticut, Florida, Maryland, Massachusetts, and Texas still have theirs coming up. Take a look at the table below and mark your calendars if you are a resident of any of these states or live close enough to one that it may be worth the trek.

Virginia’s tax holiday has already passed and DC did not have one this year, but if you’re a resident of either of these two places, Maryland’s tax holiday next week may be worth a visit. Likewise, New Yorkers may want to take a trip to Connecticut, and those living New England may find next weekend to be the perfect time to visit Massachusetts.

This year was Arkansas’ first year hosting a tax holiday, while Illinois residents will notice that their usual holiday has been canceled for 2011.

Also note that although the 17 states that are having a tax holiday this year scheduled it to coincide with the back-to-school shopping season, you do not have to be a student or have children going to school to take advantage of the offer. As long as you are buying a qualifying item (see the list below), be it clothing or computer supplies, your purchase should be tax free.

State Tax Holiday Dates Tax-Exempt Items
Alabama Aug 5-7 Clothes priced at $100 or less. School supplies priced at $50 or less. Books priced at $30 or less. A single purchase of up to $750 for computers, computer software and computer school supplies.
Arkansas Aug 6-7 Clothing and footwear priced at $100 or less. Accessories and equipment priced at $50 or less. School supplies, art supplies, and instructional material – no price limit.
Connecticut Aug 21-27 Clothing and footwear priced at less than $300. *Note: until very recently, clothing and footwear under $50 was tax-free year round; this was repealed on July 1, 2011, making this tax holiday an even better deal than usual.
Florida Aug 12-14 Clothing, footwear, and certain accessories priced at $75 or less. School supplies priced at $15 or less.
Iowa Aug 5-6 Clothing and footwear priced at less than $100.
Louisiana Aug 5-6 The first $2,500 on the purchase price of most “tangible property” for personal use, excluding vehicles, meals, and services.
Maryland Aug 14-20 Clothing and footwear priced at up to $100.
Massachusetts Aug 13-14 Most tangible items priced at $2,500 or less, excluding vehicles, motorboats, meals, utility services, and tobacco.
Mississipi July 29-30 Clothing and footwear priced at less than $100.
Missouri Aug 5-7 Clothing priced at up to $100. School supplies under $50 per purchase. Computer software priced at up to $350. Personal computers and computer peripheral devices priced at up to $3,500.
New Mexico Aug 5-7 Clothing and footwear priced at less than $100. School supplies priced at less than $15. Computers priced at up to $1000 and computer hardware priced at up to $500.
North Carolina Aug 5-7 Clothing, footwear, and school supplies priced at up to $100. Sports and recreational materials priced at up to $50. School instructional materials priced at up to $300. Computers priced at up to $3,500 and computer supplies priced at up to $250.
Oklahoma Aug 5-7 Clothing and footwear priced at less than $100.
South Carolina Aug 5-7 Clothing, footwear, computers, printers, computer software and printer supplies, and various bedding and bath items – no price limit.
Tennessee Aug 5-7 Clothing, footwear, and school supplies priced at up to $100. Computers priced at up to $1,500.
Texas Aug 19-21 Clothing, footwear, backpacks, and school supplies priced at less than $100.
Virginia Aug 5-7 Clothing and footwear priced at less than $100. School supplies priced at less than $20.

Take-Out May Help You Save Money

“Take-out or eat in?” “Sliced or not?” At a café, we usually answer these questions with an eye to convenience: Do I want to go home and eat on my couch in front of my TV or should I just eat here since I’m already here anyway? And should I have them slice the bagel for me, or do I want to make this a quick stop and can deal with the slicing myself? In some states, your decision will also determine the tax rate and, ultimately, how much you actually spend.

I first found out about the ‘take-out’ tax exemption a few months ago, while ordering some frozen yogurt at a Pinkberry in California. The cashier asked if we would be eating in or out, and when my friend and I hesitated for a moment, he explained that if we ate in, the standard food tax (of at least 7.25%, but higher depending on the county) would apply while if we ate out – including at the benches just a few steps out the door – our yogurts would be tax-free. It wasn’t unbearably hot, so we decided to eat out.

In California, while groceries are tax-free, food served at restaurants, bars, and other places with seating in the premises or close by (e.g., food court seating) is taxable. However, if you order food from these places to go, they may or may not be taxed. Generally, if (1) a business makes at least 80% of its sales through food and (2) it is a drive-in restaurant or at least 80% of its sales are consumed in its premises and/or are hot food items, the business can choose whether to tax certain take-out items or not. Specifically, cold food products (e.g., ice cream and cold sandwiches), hot bakery goods (e.g., fresh from the oven bread), and hot beverages (e.g., hot coffee, tea, and cappuccino) ordered to go may be exempt from sales tax if the business so chooses. Keep in mind, though, that this decision is per establishment, so that, even if one of the stores in a chain makes these sales tax-free, you cannot assume all their other stores do the same.

Starbucks Receipt

As you can see in my receipt for a recent purchase at Starbucks in NY, the 8.875% sales tax was applied to my iced mocha (3.65 x .08875 = 0.32), but not to my marble loaf, since the marble loaf is cold and was not prepared on the premises for my consumption.

Californian food establishments that do not satisfy the two requirements above, such as most ice-cream stores and coffee shops, should always waive sales taxes on these items if ordered for take-out: hot beverages, non-carbonated cold beverages (e.g., juice and iced tea), cold food products, and hot bakery items. Note that soda and alcoholic beverages are always taxable in California, even if ordered to go.

If this break-down seems confusing or arbitrary, consider New York’s tax-exempt food categories, which are different if sold at a “food store” or at a restaurant, deli or similar establishment. Just as in California, hot food items, food sold for consumption in the premises, and carbonated drinks sold at food stores are taxable in New York State. But all sandwiches (hot and cold), candy and confectionery, and “prepared” items are also subject to sales tax, whether ordered to-go or not. “What is a ‘prepared item’,” you ask? Anything that has been handled by the seller or at the establishment so that it is ready to eat as is, such as food on a plate, ice-cream, or self-serve food from a deli. This key description, in fact, earned the Brugger’s Bagels chain an audit last year: while regular bagels are tax-free, sliced bagels are taxable in New York, since slicing makes them ready to eat (I assume none of the tax collectors tear their bagels for eating).

At restaurants, diners, food carts, and similar establishments in New York, the only food items that are tax-exempt when ordered to-go are food and drinks that are unheated and sold in “the same way (in the same form, condition, quantities, and packaging)” as in a supermarket or grocery store. That is, coffee is not tax exempt since it is not cold, iced coffee is not exempt since it does not come the same way as it would at a grocery store (unless you are buying one of those bottled or canned Starbucks drinks), and bagels are only exempt if you’re buying them packaged as they would be in a store.

To sum up, in California, if you want to avoid taxes on bakery items, non-alcoholic and non-carbonated drinks, or cold food products, always choose take-out. If this is a store that mostly serves take-out or cold items, your purchase will be tax-free. If it isn’t, it’ll vary by store but there’s still a chance you won’t have to pay taxes on it anyway. In New York, on the other hand, getting your take-out food purchase to be tax-free may be harder, but, generally, avoid soda and sandwiches, and slice bagels yourself.

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Get Ready for Sales Tax Holiday Weekend 2009

Mark your calendars for shopping this weekend.  In several states this coming Friday, August 7th, kicks off a 2 or 3 day sales tax holiday, with back-to-school preparations in mind.  But this does not mean you have to be in school to benefit: most participating states are waiving sales taxes on any clothing purchase up to $100 (a maximum of $100 per item or per purchase, depending on the state; but if your state does the latter, just separate your items into more than one purchase under $100 if you can) and many are also including footwear and computers.  For a full list of states and items covered, visit the Federation of Tax Administrators’ website also has a good summary, but the information for DC is outdated.  The early August tax holiday in the District, which is usually longer than the 2-3 standard, has been repealed (still no news on the November one) for fiscal reasons.  But DC residents need not miss out on the benefits – a short trip on the metro into Virginia over the weekend should do the trick.  The state of Virginia is waiving its (already lower than DC’s) sales tax from this Friday to Sunday on school supplies with a sales price of up to $20 and clothing and footwear items priced at up to $100, with an unlimited number of items or total cost.  A list of eligible and ineligible items is provided by the VA Department of Taxation.

With sales taxes ranging from 4% to almost 10%, purchases of eligible items in participating states will effectively come with quite a generous discount this weekend.  So if you were planning on buying clothes, computers, or other eligible items in the near future, this weekend looks like the perfect time to go shopping, rain or shine.