AccurateTax

2026 Sales Tax Holidays by State

Wed, 14 Jan 2026 16:01:38 +0000

Sales tax holidays can be a welcome benefit for consumers, but for ecommerce businesses, they often add complexity to the already challenging task of managing sales tax compliance. Thankfully, these holidays occur only a few times a year.

Each state handles them differently, which means you’ll need to be well-informed. It’s crucial to understand whether participation is mandatory or merely recommended, whether the holiday affects state taxes alone or includes local taxes, and which specific items qualify for the exemption.

Sales tax holidays generally fall into one of three categories:

Back to School – exempt clothing, computers, and school supplies
Second Amendment – exempt guns and ammunition
Weather Preparedness – exempt items useful during severe weather, such as generators, flashlights, and batteries
Energy Star – exempt appliances and other home items that meet specific criteria to reduce energy expenditure

The availability and specific dates of the sales tax holidays change from year to year, so we’ve compiled an updated list for 2026 of holidays currently on the books. Early in the year, a lot of these have yet to be announced. As such, some of the dates below are anticipated rather than firm dates, and some links may refer to previous years.

We’ll update the table periodically throughout 2026 as new data becomes available.

State	Type	Dates	Details
Alabama	Weather Preparedness	February 21 - 22, 2026	Local sales and use tax may apply. Retailers are required to participate and are not allowed to charge tax on items that are including among the exemptions. Includes items such as batteries, radios, self-powered lights, sheets/tarpaulins, plywood, food storage cooler, first aid kits, and fire extinguishers. See complete list of exempt items. More Information
Alabama	Back to School	July 17 - 19, 2026	Local sales and use tax may apply. Retailers are required to participate and are not allowed to charge tax on items that are including among the exemptions. Exempts most general-use clothing priced at $100 or less (shirts, pants, shorts, socks, etc). Accessories, protective equipment, and sports equipment is specifically not exempt. Exempts computers, software, and school-related computer supplies priced at $750 or less Exempts non-commercial purchases of school supplies priced at $50 or less (such as pens, paper, binders, etc) Exempts non-commercial purchases of books priced at $30 or less See complete list of exempt items More Information
Alaska	All	October 1, 2025 - March 31, 2026	Alaska has no statewide sales tax, but the municipality of Skagway does. Skagway has instituted a sales tax holidays on all real tangible personal property Affects sales that physically occur within the Borough More Information
Arkansas	Back to School	August 1 - 2, 2026	Local sales tax also does not apply. Exempts most general-use clothing priced at $100 or less (shirts, pants, shorts, socks, etc). Exempts most general-use clothing accessories priced at $50 or less (jewelry, watches, briefcases and handbags, etc). Exempts purchases of certain school supplies (only specific items listed) Exempts purchases of certain school art supplies (only specific items listed) Exempts purchases of books related to school or a course of study such as textbooks and reference books More Information
Connecticut	Back to School	August 16 - 22, 2026	Exempts general clothing and footwear priced at $100 per item, or less. Certain items are excluded, such as jewelry, sports uniforms, protective equipment, accessories, and insoles. More Information
Florida	Back to School	August 1 - 31, 2026	Clothing, footwear, and certain accessories with a sales price of $100 or less per item Certain school supplies with a sales price of $50 or less per item Learning aids and jigsaw puzzles with a sales price of $30 or less Personal computers and certain computer-related accessories with a sales price of $1,500 or less, when purchased for noncommercial home or personal use More Information
Florida	Second Amendment	September 7 - December 31, 2026	Currently part of the proposed budget Hunting, fishing, and camping sales tax holiday Exempts hunting items such as firearms, ammunition, bows and crossbows; and fishing and camping items such as bait, decoys, flashlights, tackle boxes, hammocks and sleeping bags, fishing rods and reels, and tents. Various dollar limits apply More Information
Iowa	Back to School	August 7 - 8, 2026	Exempts general clothing and footwear priced at $100 or less. Certain items are excluded, such as jewelry, watches, protective equipment, umbrellas, skis and skates, and more. Local sales tax is not collected during the tax-free weekend The exemption only occurs on Friday and Saturday, never Sunday More Information
Louisiana	Second Amendment	September 4 - 6, 2026	Exempts certain items related to firearms, hunting, and ammunition This law has been created, suspended, and then reinstated More Information
Maryland	Energy Star	February 14 - 16, 2026	Exempts Energy Star Products, including Air conditioners Washers and dryers Furnaces Heat pumps Boilers Solar water heaters (which are always tax-exempt) Standard size refrigerators Dehumidifiers Programmable thermostats Compact fluorescent light bulbs Light-emitting diode (LED) light bulbs More Information
Maryland	Back to School	August 9 - 15, 2026	Exempts clothing and footwear priced at $100 or less per item. excluding accessories. More Information
Massachusetts	Back to School	TBA	Includes most tangible personal properly Excludes telecommunications, tobacco products subject to the excise imposed by 15 chapter 64C, marijuana products subject to chapter 94G, alcoholic beverages, as defined in 16 section 1 of chapter 138, gas, steam, electricity, motor vehicles, motorboats or a single item the 17 price of which is more than $2,500. More Information
Mississippi	Back to School	July 10 - 12, 2026	Exempts clothing priced at $100 or less per item. Exempts footwear priced at $100 or less per item, but excludes skates, skis, etc. Accessories (watches, jewelry, wallets, umbrellas, etc) are NOT exempt Certain cities may elect not to participate More Information - this document includes a list of eligible and non-eligible items
Mississippi	Second Amendment	August 28 - 30, 2026	Exempts firearms, ammunition and certain hunting supplies General hunting supplies and animals used for hunting are not exempt Certain cities may elect not to participate More Information - this document includes a list of eligible and non-eligible items
Missouri	Energy Star	April 19 - 25, 2026	Nicknamed the "Show Me Green" sales tax holiday Exempts the following appliances if they are Energy Star certified: Clothes washers, clothes dryers, water heaters, dishwashers, air conditioners, furnaces, refrigerators, freezers, and heat pumps Trash compactors, conventional ovens, ranges and stoves are not currently certified as Energy Star compliant, and therefore do not qualify. However, if the Energy Star label should be applied in the future, these items would become exempt during the holiday. Local jurisdictions may elect to participate or not. See the link below for cities which will and will not participate. More Information
Missouri	Back to School	August 7 - 9, 2026	Exempts clothing having a taxable value of $100 or less Exempts school supplies, as long as the total purchase does not exceed $50 Exempts computer software with a taxable value of $350 or less Exempts personal computers with a taxable value of $1,500 or less Exempts computer peripheral devices, not to exceed $1,500 Exempts graphing calculators not to exceed $150 The sales tax holiday may not apply to any retailer when less than two percent of the retailer's merchandise offered for sale qualifies for the sales tax holiday. However, the retailer must provide the taxpayer a refund of the sales tax paid if the customer requests one. Local jurisdictions may elect to participate or not. The more information link has a list of those that chose not to participate. More Information
Nevada	Other	October 30 - November 1, 2026	Purchases by members of the National Guard More Information
New Mexico	Back to School	July 31 - August 2, 2026	Exempts clothing or shoes priced at less than $100 per unit. Exempts desktop, laptop, tablets or notebook computers priced at $1,000 or less Exempts related computer hardware priced at $500 or less. Exempts school supplies for use in standard, general-education classrooms priced below $30, $100, or $200 per unit, depending on the type of supplies Certain exclusions apply in all groups. More Information
Ohio	Back to School, Other	TBA	Back-to-school related items Further details TBA More Information
Oklahoma	Back to School	August 7 - 9, 2026	Exempts clothing and shoes priced at $100 or less per item More Information
Puerto Rico	Back to School	January 2 - 3, 2026	Exempts school uniforms and supplies "School supplies" includes specified art- and music-related items More Information
Puerto Rico	Weather Preparedness	TBA	Exempts items related to hurricane preparedness, such as containers for fuel and water; storm shutters; hardware; untreated lumber and panels; ropes; non-perishable food and emergency meal kits; water; cleaning supplies; and solar equipment parts and products More Information
South Carolina	Back to School	August 7 - 9, 2026	Exempts clothing, school supplies, computers, and some bed and bath items, regardless of price Certain items are excluded, such as (but not limited to) rentals, mattresses, smart phones, cameras, uniforms, sports equipment, and more. More Information
Tennessee	Back to School	July 24 - 26, 2026	Exempts most clothing, school supplies, and computers. Clothing and schools supplies must be individually priced at $100 or less to be exempt. Computers must be priced at $1500 or less to qualify for the exemption. More Information
Texas	Weather Preparedness	April 25 - 27, 2026	Exempts portable generators priced at $3000 or less Exempts hurricane shutters and emergency ladders priced at $300 or less Exempts Batteries (AAA cell, AA cell, C cell, D cell, 6 volt or 9 volt), first aid kits, fuel containers, ground anchor systems and tie-down kits, hatchets and axes, mobile telephone batteries and chargers, nonelectric coolers and ice chests for food storage, nonelectric can openers, portable self-powered light sources (hand cranked flashlights), portable self-powered radios, including two-way and weather band radios, reusable and artificial ice products, smoke detectors, fire extinguishers and carbon monoxide detectors, tarps and other plastic sheeting priced at $75 or less More Information
Texas	Energy Star	May 23 - 25, 2026	Exempts the following Energy Star products: air conditioners with a sales price of $6000 or less; refrigerators with a sales price of $2000 or less; ceiling fans, incandescent and fluorescent light bulbs, clothes washers, dishwashers, and dehumidifiers Exempts products such as toilets, faucets, shower heads, and irrigation controls that cary the WaterSense label or logo. Exempts certain water conserving products like mulch, rain barrels, and plants, but only if the products are for use on residential property More Information
Texas	WaterSense	May 23 - 25, 2026	WaterSense products purchased for business or personal use Water-conserving products More Information
Texas	Back to School	August 7 - 9, 2026	Exempts clothing and footwear priced at less than $100 Exempts backpacks used by elementary and secondary students priced at less than $100. Wheeled backpacks are included as long as they can also be worn with straps on a persons back. Luggage is excluded. Exempts personal purchase of school supplies. (Businesses must provide an exemption certificate to avoid sales tax.) Retailers may not advertise that they will pay customers' sales tax on non-exempt items. However, they may advertise that the selling price includes sales tax. More Information
Virginia	Back to School / Energy Star / Weather Preparedness	August 7 - 9, 2026	Exempts clothing and footwear costing less than $100 per item Exempts school supplies costing less than $20 per item Exempts portable generators costing less than $1000, gas-powered chainsaws costing less than $350, and chainsaw accessories and other hurricane preparedness items costing less than $60 Exempts qualifying Energy Star or WaterSense products for home use that cost less than $2500 each More Information
West Virginia	Back to School	July 31 - August 3, 2026	Exempts clothing and footwear costing $125 or less per item Exempts school supplies costing $20 or less per item Exempts sports equipment costing $150 or less per item Exempts laptop computers and tablets priced $500 or less per item More Information

States Without Sales Tax Holidays

The following states do not currently have a planned sales tax holiday in 2026:

Arizona
California
Colorado
Delaware (which has no sales tax)
Georgia
Hawaii
Idaho
Illinois
Indiana
Kansas
Kentucky
Maine
Michigan
Minnesota
Montana (which has no sales tax)
Nebraska
New Hampshire (which has no sales tax)
New Jersey
New York
North Carolina
North Dakota
Oregon (which has no sales tax)
Pennsylvania
Rhode Island
South Dakota
Utah
Vermont
Washington
Wisconsin
Wyoming

Tips for Retailers

In order to make sure you track your sales accurately during these sales tax holidays, you need to know whether or not you are required to participate in the sales tax holidays, and plan accordingly. This includes modifying tax calculations on your website or in-store as needed, and classifying exempt items properly. The use of sales tax software like our TaxTools product can help simplify the process and help you make sure you’re in compliance with tax holiday laws and regulations.

For a complete guide to helping you understand sales tax and your role in it, read our comprehensive Guide to Sales Tax.

Breaking it Down

If you analyze the list above, you’ll notice that there are really only 4 main types of tax holidays. These are:

Back to School Sales Tax Holidays – These are the most common across the board. The holiday generally happens just before school-age children are set to return to the classroom in the fall. What gets exempted from sales tax differs somewhat by state, but it generally includes school supplies, clothing, shoes, and sometimes computers and software.
Energy Star Appliance Sales Tax Holidays – This holiday encourages consumers to decrease their use of energy resources by purchasing appliances that are more energy or water efficient.
Second Amendment Sales Tax Holidays – Despite the political divide over gun rights, several states exempt these items from sales and use tax with a holiday. In general, these occur just before the start of hunting season.
Severe Weather Preparedness Sales Tax Holidays – This type of holiday exempts items that people would need when power goes out, severe storms hit, or during other types of emergencies. Think batteries, flashlights, and power generators.

The post 2026 Sales Tax Holidays by State appeared first on AccurateTax.

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5 Things to Do Before Black Friday (That Aren’t Updating Your Promo Code)

Thu, 06 Nov 2025 17:27:45 +0000

Black Friday is almost here, and while you’re busy planning discounts and stocking up on shipping supplies, it’s easy to overlook the less flashy side of ecommerce: sales tax compliance.

If you want to avoid post-holiday compliance woes, now is the time to double-check a few critical items. Here’s a quick checklist to make sure you’re ready.

1. Double-Check Your Tax Nexus

Have your sales grown this year? If so, you may have reached economic nexus in new states where you haven’t collected previously. It’s important to track sales against each state’s small business exemption thresholds, and to begin collecting in new states if you’re at that threshold. Even if you’re only approaching the threshold, holiday sales may push you over. It’s better to start sooner rather than later.

Click here to learn more about economic nexus.

Some shopping carts, such as Shopify, track nexus for you. If you’re using our services on certain platforms, we do as well. But if your e-commerce software doesn’t track it for you, you should be doing it manually.

Also, make sure you haven’t gained physical nexus in new states, either. If you started using Fulfillment by Amazon (FBA), a different fulfillment center or service, or if you hired remote employees in other states, you may have an obligation there even if you haven’t reached the threshold for economic nexus. Physical nexus applies to sellers of all sizes; there are no thresholds.

2. Audit Your Product Taxability

Not all products are taxed the same way in every state. Clothing, food, supplements, and digital goods are some examples of products that have unique taxability rules. Go through your product catalog and confirm that your tax settings are correct on an item-level basis.

If you over-collect due to errors, you usually must remit that overcollection to the state. However, if you under-collect, you still have to pay the correct amount… and this could mean the difference comes out of your own pocket.

3. Review Shipping and Handling Settings

In some states, shipping is taxable. In others, it’s exempt but only if you show it as a separate charge. Handling charges are often taxable, especially if listed separate or bundled with shipping as a single “Shipping and Handling” line item.

Make sure your store’s checkout is configured to calculate tax on shipping correctly.

4. Check Your Filing Frequency

If you’ve grown this year, your filing frequency may have changed. States where you’re registered may move you from quarterly to monthly based on sales volume. Check your notices and update your filing calendar before you’re surprised by a new deadline!

Pro tip: our filing services handle this for you.

5. Test Your Checkout Tax Settings

It’s important to test your entire website prior to the busy holiday season, but many retailers don’t think to test sales tax. Run a few test orders across different states and products, and make sure tax is being applied correctly. This simple step can help you catch setup issues before hundreds of orders (or more!) go through your system.

Final Tip: Black Friday is a great time to grow your business. Just make sure your tax compliance scales with your sales. A little prep now can prevent a lot of trouble later.

The post 5 Things to Do Before Black Friday (That Aren’t Updating Your Promo Code) appeared first on AccurateTax.

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How Do I Calculate Sales Tax Backwards?

Tue, 02 Jul 2024 16:01:52 +0000

Whether to record the sales tax portion of a refund or to provide greater transparency to your customers about the components of their purchase, there are several reasons you might need to calculate sales tax backwards. For example, if you’ve lost a receipt, and you’re looking at your credit card statement, you would only see the final selling price. To find out the amount of tax, you need to work backwards. This will let you find separate out the tax from the original price of the item.

To determine the total amount of sales tax in the sales price, a simple formula can be used.

Reverse Sales Tax Formula

To determine the amount of sales tax collected on a purchase, you must divide the total cost paid by (1 + tax rate). As an example, for a purchase in the State of Florida, where the sales tax rate is 6%, the calculation would look like this:

Total Price: $106
Tax Rate: 6%
Formula: 106/1.06

Gross Cost: $100
Sales Tax Paid: $6

Using this formula, you can determine that the sales tax amount in the final price is $6 and the gross price of the product is $100. Be sure when adding the percentage rate of the sales tax to “1” that you move the decimal point by two to reflect that it is a percentage.

Determining the Sales Tax Rate for Your Calculations

To effectively use a reverse tax calculator, you must know the exact sales tax rate, including both state and local sales tax, paid by the customer. This will change for most customers depending on their location, as well as potentially the location of the recipient of the product (if different than the purchaser).

As such, it’s important to know the total sales tax rate. However, you can also separate the tax rates to determine how much of the sales tax is being collected for state versus local. For example, if the same $100 Florida purchase was made in Miami, a 7% sales tax would apply instead of 6% due to the Miami-Dade County surtax.

The formula remains the same:

Total Price: $107
Tax Rate: 7%
Formula: 107/1.07

Gross Cost: $100
Total Sales Tax Paid: $7

There are many reasons a reverse sales tax calculation may be needed. Thankfully it is an easy process to perform, and quickly provides an accurate total for both the gross price of a product and the final sales tax paid. To ensure you have accurate local tax rates for everywhere you do business within the United States, from both state and local governments, check out our sales tax calculations software.

The post How Do I Calculate Sales Tax Backwards? appeared first on AccurateTax.

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States’ Sales Tax Mailing Lists and Where to Subscribe

Tue, 16 Apr 2024 18:13:26 +0000

Many of the states’ Departments of Revenue offer mailing lists related to sales tax. Signing up for these lists will allow a state to email you with news that relates to sales tax, use tax, and other related topics. We’ve done our best to gather links to the mailing lists for each state, so that you can easily find them and subscribe to those you’re interested in.

Some states also offer SMS (text message) alerts, and in many cases, you can sign up for those using the same form.

A few states appear not to have mailing lists, but if you know of one that we missed, please let us know. Also, states change their websites on a regular basis, so if a link is broken, feel free to also drop us a note and we’ll fix it.

Alabama

We are unable to find a mailing list relating to sales tax in Alabama. However, there is an archive at https://www.revenue.alabama.gov/sales-use/local-tax-notices/ that you may find useful.

Alaska

Alaska is a NOMAD state and has no statewide sales tax.

Arizona

https://azdor.us21.list-manage.com/subscribe?u=536c2584a12f0adcde024c675&id=ab18b9f0f3

Arkansas

We are unable to find a mailing list relating to sales tax in Arkansas.

California

https://www.cdtfa.ca.gov/subscribe/

Colorado

https://tax.colorado.gov/email-sign-up

Colorado has separate lists for different tax types, including one for Sales & Use Taxes.

Connecticut

https://portal.ct.gov/DRS/Ealerts/E-News/Subscribe-to-e-alerts

Click “latest news”.

Delaware

Delaware is a NOMAD state and has no sales tax.

District of Columbia

https://service.govdelivery.com/accounts/DCWASH/subscriber/new?preferences=true

Florida

https://floridarevenue.com/Pages/subscribe.aspx

Georgia

https://dor.georgia.gov/help/subscribe-revenue-emails

Hawaii

https://tax.hawaii.gov/news/mailinglist/

Idaho

https://tax.idaho.gov/about-us/stay-informed/

Idaho has one mailing list for general tax news, one for tax pros.

Illinois

We are unable to find a mailing list relating to sales tax in Illinois.

Indiana

https://www.in.gov/dor/news-media-and-publications/indiana-tax-bulletin-e-newsletter/

Iowa

https://public.govdelivery.com/accounts/IACIO/subscriber/new?qsp=IACIO_1

Kansas

Kansas has a mailing list at the link below but doesn’t appear to have any topics relating to sales tax.

https://public.govdelivery.com/accounts/KSDA/subscriber/new?topic_id=KSDA_69

Kentucky

We are unable to find a mailing list relating to sales tax in Kentucky.

Louisiana

We are unable to find a mailing list relating to sales tax in Louisiana.

Maine

https://www.maine.gov/revenue/publications/maine-tax-alerts

Maryland

We are unable to find a mailing list relating to sales tax in Maryland. There are some alerts at https://www.marylandtaxes.gov/individual/sales-use/tax-Info/index.php.

Massachusetts

https://wfb.dor.state.ma.us/DORCommon/Listserv /DORMailList.aspx

Michigan

https://public.govdelivery.com/accounts/MITREAS/subscriber/new?topic_id=MITREAS_18

Minnesota

We are unable to find a mailing list relating to sales tax in Minnesota.

Mississippi

We are unable to find a mailing list relating to sales tax in Mississippi, but there are some advisories at https://www.dor.ms.gov/business/tax-notices/sales-and-use-tax-notices.

Missouri

https://mytax.mo.gov/rptp/portal/home/email-subscription/

Montana

Montana is a NOMAD state and has no sales tax. Their department of Revenue has a newsletter for other topics, however. You can visit their website and find the sign up form in the footer.

Nebraska

https://public.govdelivery.com/accounts/NEREV/subscriber/new

Nevada

We are unable to find a mailing list relating to sales tax in Nevada.

New Hampshire

New Hampshire is a NOMAD state and has no sales tax.

New Jersey

https://www.nj.gov/treasury/taxation/listservice.shtml

New Mexico

https://www.tax.newmexico.gov/nm-taxation –revenue-department-notification-service/

New York

https://www.tax.ny.gov/help/subscribe.htm

On the right side of the screen, look for “Subscribe to tax tips, news, and updates”.

North Carolina

https://www.ncdor.gov/contact-us/e-alerts

North Dakota

https://www.tax.nd.gov/news/email-sign

Ohio

https://tax.ohio.gov/help-center/email-us/tax-alert

Oklahoma

We are unable to find a mailing list relating to sales tax in Oklahoma.

Oregon

Oregon is a NOMAD state and has no sales tax.

Pennsylvania

https://www.revenue.pa.gov/News%20and%20Statistics/TaxUpdate/Pages/default.aspx

On the right side of screen look for “Sign up for updates”.

Rhode Island

We are unable to find a mailing list relating to sales tax in Rhode Island, but there are newsletters at https://tax.ri.gov/guidance/newsletters.

South Carolina

We are unable to find a mailing list relating to sales tax in South Carolina.

South Dakota

We are unable to find a mailing list relating to sales tax in South Dakota, but there is a newsroom at https://dor.sd.gov/newsroom/.

Tennessee

There is a sign up form for a general mailing list at https://notify.app.tn.gov/notify/sign_up.html but it has no topics related to sales tax.

Texas

https://public.govdelivery.com/accounts/TXCOMPT/subscriber/new

Utah

We are unable to find a mailing list relating to sales tax in Utah.

Vermont

https://tax.vermont.gov/forms-and-publications/news

Virginia

https://www.tax.virginia.gov/taxpayer-alerts

On the left side of screen look for “Sign up for email updates”.

Washington

https://public.govdelivery.com/accounts/WADOR/signup/17806

West Virginia

We are unable to find a mailing list relating to sales tax in West Virginia.

Wisconsin

https://www.revenue.wi.gov/Pages/HTML/lists.aspx

Wyoming

We are unable to find a mailing list relating to sales tax in Wyoming, but there is an archive of newsletters at https://excise-tax-div.wyo.gov/newsletter-taxing-issues.

The post States’ Sales Tax Mailing Lists and Where to Subscribe appeared first on AccurateTax.

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A Guide to Collecting and Validating Sales Tax Exemption Certificates

Tue, 26 Mar 2024 15:13:15 +0000

Dealing with sales tax can be tricky, especially when it comes to sales tax exemption certificates. These are special forms that allow entities to make purchases without paying sales tax. But it’s not enough just to gather these forms from customers. Your business needs to make sure they’re up-to-date, complete, and valid.

Whether you’re selling to other businesses or to groups that don’t have to pay sales tax, you need to know how to handle these forms correctly. This post will help you understand what these certificates are, how to get them the right way, and how to check if they’re valid.

Understanding Sales Tax Exemption Certificates

Sales tax exemption certificates are forms that buyers provide to sellers. They prove that the buyer doesn’t have to pay sales tax for certain reasons, such as purchasing products for resale or purchases made by a nonprofit organization.

There are different types of exemption certificates. Not all states have each kind, but throughout the United States, these are the types of certificates you may encounter:

Resale Certificates: Used by businesses to purchase goods for sale to an end user. In the United States, sales tax is paid only on the final retail sale, in most cases.
Nonprofit Exemption Certificates: Given by charitable or educational organizations to avoid paying sales tax on items for use by the organization.
Other Exemptions: Depending on the state, other exemptions might include agricultural, industrial, or governmental.

It is important not to charge sales tax on sales that should be exempt, but due diligence is required to make sure the sale is truly exempt. Collecting and validating these certificates helps businesses avoid legal issues and penalties. If state tax authorities discover a business has been handling these incorrectly (or not at all), it could lead to fines or audits.

How to Manage Exemption Certificates

Step 1 – Collecting Certificates

Collecting sales tax exemption certificates is a critical step for businesses that sell goods or services exempt from sales tax under certain conditions. Proper collection and storage of these certificates keep your business compliant with tax regulations and protect you in the event of an audit.

The best practice is to collect the exemption certificate and validate it prior to the sale being made. If you wait until after the transaction is completed, you may find your buyer to be uncooperative in providing the certificate, or even fraudulent in claiming the exemption in the first place.

Step 2: Validating Certificates

Validating sales tax exemption certificates is as crucial as collecting them. Validation ensures that your business is not liable for sales tax on exempt transactions. Here’s how to approach the validation process effectively:

Check the Expiration Date: Confirm that the certificate is current and not expired. Note that some certificates do not have expiration dates, while others may need annual renewal. If the certificate expires, make a note in a database or calendar system so you know to contact your customer for an updated form.
Verify the Buyer’s Information: Ensure that the buyer’s name, address, and type of business match what’s on their certificate and in your records.
Confirm the Certificate’s Applicability: Make sure the certificate applies to the items being purchased. Some exemptions are product-specific.
State Verification: If possible, use state websites or tools to verify the validity of the exemption certificate. Many states offer online resources for this purpose.

Step 3: Storing Certificates

Whether you store certificates digitally or in paper form, security and organization are critical. Organizing certificates by customer and by state will help you locate them when needed, as it’s important to be able to find the appropriate certificate if you need to verify the information, applicability, expiration date; or if you are audited.

Keeping track of expiration dates is also important, which is where a database or spreadsheet of certificate details can come in handy. Exemption certificate management services can perform this task as well.

Exemption certificates often contain sensitive PII (Personal Identifiable Information). Therefore, it’s also important to store the certificates securely. For digital storage, you’ll want secure storage with access control and regular backups. Paper forms should be kept under lock and key, with only critical team members having access.

The length of time that you store certificates is also a consideration. Different states have different requirements, but generally, it’s advisable to keep certificates for at least four years after the last use.

Step 4: Integrating with Purchasing Systems

Once the certificate has been received and validated, it likely needs to be integrated with other systems such as your e-commerce website, point-of-sale systems, and accounting software. These systems need to know not to charge sales tax to exempt customers on applicable items and orders.

Step 5: Reviewing and Updating Certificates

Regularly update and review your records to ensure all certificates are still valid and up-to-date with current tax laws. If a certificate is expiring and the customer is still active, you should request a new certificate prior to the expiration.

States’ laws surrounding exemptions also change, so staying up-to-date with legislation and process changes is also advised.

Finally, if your customer’s information changes – for example, their business address or ownership changes, or their charitable organization status is revoked – a new certificate may be needed, or the exemption may no longer apply.

Common Mistakes to Avoid

Here are some of the most common mistakes made by businesses, which can cost significant money in fees, penalties, and interest, especially during a sales tax audit:

Accepting Outdated or Incomplete Certificates: Always check the date and ensure all required fields are completed.

Not Verifying Buyer’s Eligibility: Ensure the buyer is eligible for the exemption they are claiming.

Failing to Update Records: Regularly review and update your exemption certificates as laws and customer statuses can change.

For businesses operating in multiple states, it’s important to understand that each state may have its own forms and requirements for sales tax exemption certificates. Therefore, it’s essential to familiarize yourself with the regulations in each state where you conduct business.

Effective management of sales tax exemption certificates is essential for maintaining compliance and avoiding penalties. By addressing common challenges with proactive strategies and solutions, businesses can streamline their processes, reduce risks, and focus more on their core operations. Remember, while technology can provide significant assistance, the ultimate responsibility lies with the business to ensure all sales tax exemption certificates are properly collected, validated, and managed.

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Top Ecommerce Trends You Should Prepare for in 2024

Wed, 13 Dec 2023 18:45:06 +0000

2023 was a year of accelerated change for ecommerce companies. More than any time since the advent of the mass-market smartphone, technology has leaped forward in ways that will directly impact how ecommerce businesses operate and grow.

For that reason, it’s more important than ever to have a clear plan for leveraging developing trends in digital commerce and online shopping. As commercially available generative AI becomes more ubiquitous, mobile commerce and social commerce continue to blur the lines of what it means to shop online, and consumers expect greater personalization than ever before. 2024 is shaping up to significantly impact how online stores operate. These trends are shaping the ecommerce industry at an incredible rate.

The Blending of Mobile and Social Commerce

More than two-thirds of web traffic comes from mobile devices, and 75% of consumers would rather shop on their mobile device than on a desktop. Gone are the days of digital skepticism from consumers about buying through a phone. Mobile commerce feels more tangible and secure than ever, thanks to facial recognition, fingerprint technology, and secure standards across all major devices.

In tandem with a more complete shift to mobile purchasing, social commerce is growing exponentially. From the early days of Instagram shopping, we’ve now reached a point at which nearly 50% of social media users would use a social media app to buy a product. Instagram shops, combined with Meta advertising tools, make it easier than ever to reach huge swaths of consumers based on their activity and behavior on a mobile device.

But it’s not just Instagram driving the mobile and social commerce boom. TikTok has emerged as a major player in ecommerce thanks to the launch of TikTok Shop in late 2023. Because it is a new platform and shop owners are still learning how best to optimize their efforts for TikTok, 2024 will be a developing year for the platform. But with more than 1 billion monthly active users globally and the comfort of younger generations purchasing through social media platforms, TikTok is primed to grow rapidly in the new year.

Enhanced Search Options

Traditional search has long been a hindrance to a streamlined shopping experience. The larger your catalog, the more work is needed to ensure consumers can filter and search for what they need. Creating a structured database is increasingly powering new ways for consumers to search for products, including through voice and image searches.

Voice assistants are nothing new, but they’ve reached a point of saturation that users are fully comfortable asking Alexa, Siri, or Google to find something for them when in a hurry. With 40% of users having searched for product data and 24% saying they have bought with a voice assistant, these tools are now a crucial part of your multi-channel efforts.

Search results are starting to skew to reflect the desire for voice-friendly results. More than ever, it’s important that your site be optimized for a non-visual experience, including appropriate alt-tags for all images, detailed, keyword-rich product descriptions, and accurate categorization and tagging of all products. At a higher level, voice search integration directly with your store can allow users to buy products from your website or storefront on a third-party marketplace more seamlessly.

Major platforms like eBay have long since implemented image search functionality to help consumers find products more seamlessly. Whether a customer is trying to replace a long-loved sweater, search for a hat they find in a local thrift store online, or get ideas for gifts, image search is becoming a more robust tool that many ecommerce brands will implement on their websites.

VR and AR Shopping

Virtual reality has become commercially available in an affordable package in recent years, but its appeal remains relatively niche. Growth rates have been modest among online shoppers, with adoption expected to pass 100 million for the first time in the next 2-3 years. That said, in 2023, Sony, Meta, and Apple all announced or released new hardware, and the applications of these tools continue to expand.

From games and exercise apps to more robust augmented reality (AR) applications, headsets, glasses, and goggles are becoming more powerful, while AR applications within phones are becoming more commonplace, especially for ecommerce brands.

At its most basic level, AR can be implemented within applications developed by third-party marketplaces such as Amazon or Walmart. Ikea’s AR tools allow consumers to easily drop any object from their catalog into a home to see how it would look. It’s not perfect, but the technology is making it easier to engage with purchases, especially large ones that take up space or that impact the look and feel of a home, in a virtual setting. Whether through a fully immersive experience with a headset or an AR-empowered app, ecommerce brands need to consider how they can provide this kind of customer experience for their customers.

Sustainability

Despite ongoing inflation, rising prices, and the cost of greener production and shipping processes, consumers continue to demand greater sustainability from businesses. In a recent survey, 82% of consumers indicated they would pay more for a product with sustainable packaging, and the market as a whole is expected to grow by 8% CAGR over the next five years.

Consumers want convenience above all else, but increasingly, they are aware of the impact that convenience might have on the environment. Shipping materials, emissions from delivery trucks, and the long-term impact of single-use packaging are all concerns that companies are looking to address.

By carrying products that are less reliant on plastic, adjusting shipping practices to align with sustainability expectations, and communicating your dedication to more sustainable business practices, you can better engage with an eco-conscious consumer base in 2024.

Artificial Intelligence

Artificial intelligence (AI) and machine learning are more than just a trend. It is a fundamental shift in the technological landscape of the Internet. Ecommerce brands are primed to benefit from this shift in a number of ways, from reducing the time it takes to complete simple tasks to providing better and more immediate customer service and optimizing the user experience on your website.

In the past, it took hours of manual labor and costly design resources to create the imagery and add the tags and structured data to your catalog database that would ensure optimal performance in search engines and ads. AI is allowing brands to streamline things like creating alternate, holiday-themed, or context-specific imagery for their products. It is also allowing brands to automatically tag their products based on existing products in their database. At a basic level, AI allows brands to streamline operations, reduce overhead, improve their ecommerce stores, and provide better prices and experiences to their customers.

Through 2023, AI is projected to boost sales by 59% through recommendations, reduce customer interactions drastically (handling 80% or more), and grow by nearly 40% over the next five years.

In 2024, AI will continue to evolve, and be more accessible to small ecommerce brands for things like predictive analytics around when and how people will buy products from them. This includes things like better ad performance, website optimization, sales page optimizations, and more. AI goes beyond automation and personal assistance and is becoming an underlying resource for improved performance across the board.

Personalization

Personalization is a must, but consumer expectations have evolved since the sharp increase in ecommerce activity in 2020 and 2021. With so many more people now comfortable buying online, there is an underlying expectation that recommendations, suggestions, and shopping experiences in general will be catered to the specific needs of users.

Salesforce recently reported that 80% of consumers consider their experience shopping to be as important as the products they buy, and 65% expect a personalized shopping experience. To effectively personalize, brands need powerful predictive tools and AI solutions, and to power those tools, they need ample data. Thankfully, the platforms that enable that kind of data collection are becoming more prevalent and less expensive for smaller brands.

Looking Ahead to 2024 and Beyond

Ecommerce is a part of the economic fabric of the world, and in 2024, we’ll continue to see technology enable greater personalization, improved search experiences, and faster access to the products consumers need. As you prepare for the year ahead, consider the role that technology can play in optimizing your business. The tools necessary to make those experiences a reality are becoming more accessible than ever before. Incorporating some of these top ecommerce trends into your business plan will help you stay competitive.

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Affiliate Marketing Sales Tax Laws in 2023

Thu, 08 Dec 2022 14:38:50 +0000

Affiliate marketers, third-party publishers, and partners operating independently of vendors have provided a valuable cornerstone for the Internet economy since its inception in the 1990s. While that has not fundamentally changed, the processes, technologies, and policies surrounding affiliate marketing have changed quite a bit. Sales tax laws around online sales have been overhauled in almost every state in the last five years, so it’s more important than ever to be up to date on what’s required, what’s not, and how to ensure compliance wherever you are promoting.

The Relationship Between Affiliates and Online Retailers

One of the reasons sales tax for affiliates remains so tricky is that the relationship between affiliates and the online retailers they support is unconventional, especially in the context of modern tax laws. Affiliates are not strictly selling anything, but they do receive commissions for each sale made on behalf of the retailers they partner with. So who is taxed, for how much, and when? Not to mention the fact that affiliates are rarely in the same state as the warehouse of the goods they helped sell, so for instances where sales tax is applicable, when is nexus established?

As a result of this complex relationship, affiliate nexus sales tax laws have shifted consistently, even following the Wayfair ruling by the Supreme Court, holding that physical nexus was no longer required for sales tax to be collected. The question remains—how are affiliates defined, and when do they need to collect and remit sales tax?

Affiliate Nexus vs. Remote Nexus

The first thing to consider is whether a business is, in fact, defined as an affiliate. Because all 46 states that collect sales tax have passed remote nexus laws that require out-of-state sellers to collect and remit sales tax on sales to that state’s residents, there is very little ambiguity about when and where to collect sales tax. If a business sells goods in a state that collects sales tax and reaches the threshold for collecting sales tax (typically $100,000 in annual sales or 200+ transactions per year, though it varies by state), they are required to register with that state.

But affiliates are defined differently in some states. Marketplace facilitator laws, for example, exist in many of the states that now have economic nexus laws. These laws require larger businesses (like Amazon and eBay) to collect and remit sales tax on behalf of smaller vendors who operate on their platforms, capturing a large percentage of remote sales. Because of these laws, several existing affiliate nexus laws have been appealed. For example, Arkansas, California, and Colorado all appealed their affiliate nexus laws in 2019, shortly following the passage of economic nexus legislation. Others have revised and rewritten their affiliate nexus laws to accommodate modern affiliate programs and loopholes created by the new online approach to sales tax.

What Sales Tax Looks Like for Affiliates in 2023

There are currently 24 states in which affiliate nexus laws remain. Many of these states have on the books the same affiliate nexus and click-through nexus laws they did in the late 00s and early ’10s. The result is that there is some confusion about what affiliates are required to do in these instances. Connecticut’s affiliate nexus law, for example, was passed in 2011 and broadens the definition of “retailer” to include anyone employed as an independent contractor who lives in the state of Connecticut. The enactment of remote seller nexus laws, however, raised the reporting and collection threshold from $2,000 to $100,000 in 2019. Affiliate nexus remains, however.

Other states have fully repealed their individual click-through nexus and affiliate nexus laws, encompassing all online business activities in economic nexus laws. These states include:

Arkansas
California
Colorado
Ohio
Washington

In these states, affiliates should evaluate economic nexus laws to determine what responsibilities they have for collecting and remitting sales tax. All of these states have marketplace facilitator laws on the books as well that, in some cases, encompass affiliate activities.

How Things Are Broadly Simplifying

Most state affiliate nexus laws apply to those affiliates operating within that state, but it’s important to check if economic nexus also applies as it broadly applies to those who operate in other states.

The broader benefit, however, of the advent of economic nexus laws is that the Supreme Court, in the Wayfair decision, emphasized the importance of new laws not being burdensome and onerous to small businesses. As a result, most economic nexus thresholds are quite high, ensuring only moderately sized businesses (typically doing $100,000 or more in business within a state each year, though it varies by state) will need to collect and remit sales tax. Because many affiliate nexus laws had much smaller thresholds, this actually reduces the tax collection requirements for businesses operating affiliate programs.

Additionally, because some version of economic nexus and marketplace facilitator laws exist in all 46 sales tax collecting states, publishers are less likely to reduce access for affiliates in states like California and New York that had previously targeted affiliates. While there is a much broader, more expansive set of tax laws in place now than 10 years ago, these laws are generally similar to one another, and they are more interested in collecting sales tax from larger entities that have the resources to collect and remit in multiple states at once.

If you run an online business that serves as an affiliate for larger vendors, be sure to evaluate not just whether the states those vendors operate in have affiliate nexus laws, but also if they have economic nexus laws that directly impact the thresholds at which you are required to collect and remit sales tax. While the laws are designed to be friendly to small businesses in most states, it is still your responsibility to check in advance and ensure you are registered for collection when applicable.

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Colorado Retail Delivery Fees

Mon, 27 Jun 2022 16:32:38 +0000

If you operate an e-commerce business, especially if you already collect sales tax in Colorado, you’ve probably heard about the new Colorado Retail Delivery Fees. It’s not a new tax per se, but the fee is being collected on all orders shipped into the state of Colorado.

Colorado Retail Delivery Fees At-a-Glance

The fees are effective July 1, 2022.
The total fee is $0.28 (or 28 cents) per order, even if the order ships in multiple shipments. You can see the breakdown of the fees here.
The fee amount may change yearly. The $0.28 amount is correct through for July 1, 2025 through June 30, 2026.
The retail delivery fees themselves are not taxable.
The fees should be charged to the customer, listed separately on order receipts, and be labeled “Retail Delivery Fees”
If the entire transaction is non-taxable, then the fee should not be added to the invoice; however, if even one (1) item in the transaction IS taxable, then the fee should be included.

Implementation

Because the CO Retail Delivery Fees are a fee and not a tax, the AccurateTax system itself will not report this, at present. However, we have added the ability for our customers to include the RDF in your invoices as an option to our plug-ins to facilitate collection by our clients. If you use one of our provided sales tax plug-ins, you should upgrade to the latest version in order to support this fee.

In our plug-ins, the option to collect this fee can be turned on or off only at this time. If the option is turned on, and the conditions for including the fee are met, then the fee will be added to the order and displayed to your customer as a separate charge during checkout.

You should not change the “Retail Delivery Fees” wording. The Colorado Department of Revenue requires the proper wording to be listed on all affected orders.

Retail Delivery Fee Registration and Filing

Retailers who have an “active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021,” do not need to register; they will be automatically registered for the new fees. There is no process to opt out of the automatic registration.

There is also a new return to complete, which will be due on the same schedule as a retailer’s sales tax returns. This new return is DR 1786. For example, if you file monthly, your sales tax return is due on the 20th of the month following a given collection period. Your DR 1786 return and payment of the retail delivery fees will also be due on the 20th of the month.

A return is required to be filed every period, even if no fees were collected. In other words, even if you had no taxable orders to Colorado, you must file a zero dollar return using DR 1786.

You do NOT need to break down the fees by jurisdiction or location.

What You Need to Do

If you’re an AccurateTax customer using a platform for which we provide a plug-in, simply download the latest version by logging in to your account. You can also contact your account representative for an update.

Update your website(s) with the new version of the plug-in, go into Settings, and turn the retail delivery fee on.

Then simply make sure to submit your DR 1786 by the due date each period.

If you have a custom integration with AccurateTax, you will need to add support for the Colorado Retail Delivery Fees for all taxable orders shipping to a Colorado location.

For more information about the fees themselves, visit the Colorado Department of Revenue website.

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The Growing Impact of Ongoing E-commerce Supply Chain and Fulfillment Issues

Mon, 23 May 2022 16:00:24 +0000

It’s been more than two years since the first substantial wave of impacts hit the economy, and we’re still feeling the aftershocks. Supply chains continue to buckle under the pressure of increased demand and months of disruption across the globe, and fulfillment has become an urgent, ongoing concern for most companies.

A recent Accenture survey shows that 94% of Fortune 1000 companies saw supply chain disruptions in the last two years, and 55% of those companies have downgraded or plan to downgrade their growth outlook as a result. If the big guys can’t weather the storm, how are small businesses and retailers managing persistent challenges that don’t look to go away anytime soon?

The Heart of the E-commerce Supply Chain Issue

The supply chain is a complex, multifaceted system that was always designed to work just in time and to scale appropriately to demand. It was not designed to absorb a sudden, unpredictable surge in demand, reduction in capacity, and global turmoil. As a result, we’ve seen several issues develop that are impacting all facets of the supply chain.

At one point in summer 2021, the average cost of a shipping container increased by four times from where it was the year before. Prices have peaked as high as $20,000 or more (from average prices well below $5,000), and today still average more than $10,000. This means that shipping costs are higher in general, and the reduced capacity that this represents means delays in shipping many goods.

In addition to the higher costs, ocean freight is taking upwards of 5-6 weeks longer than it did in early 2020. This leads to shortages of popular goods, reduced capacity in retail stores and e-commerce shops, and general frustration from consumers.

Of course, this isn’t it. Inflation has become a dominant concern in 2022 with the International Monetary Fund predicting 5.7% global inflation, following an increase in consumer prices of 8.5% in the United States in March 2022. Prices continue to go up, which means many suppliers are passing those costs on to e-commerce retailers, who must now contend not only with delays in receiving goods but the need to increase prices.

Having the Supply Chain Conversation with Customers

With costs up, shipments delayed, and relief seemingly still months away, how should e-commerce retailers communicate these issues to customers without fracturing an already delicate relationship?

To start, do everything you can to maintain trust and transparency with your customers. Even outside of these particularly trying times, there is an increased expectation from consumers about the relationships they have with retailers. That means listening and responding to customer feedback, utilizing the channels that customers are most likely to use, and measuring customer response to fully understand what is most concerning. There are several elements of the e-commerce supply chain and inflation crisis that are outside of your control, but that doesn’t mean customer concerns should be ignored. Let’s take a closer look at how to communicate these issues in a way that is open and considerate:

Communicate Availability and Delays Clearly – Ensure your systems are capable of showing inventory data, communicating limitations on stock, and showing any adjustments they should expect to ship times.
Map Out Substitution Strategies – Some products may go out of stock and stay that way for weeks or months at a time. Don’t lose sales because you don’t have a clear plan in place for how to accommodate customers interested in products that are not currently available. Map out clear alternatives, communicate them to shoppers and employees, and send emails to anyone who is actively viewing out-of-stock product pages.
Increase Communication Frequency – Especially if there’s a risk of delays due to stock shortages, shipping delays, or other supply chain-related issues, send frequent emails and updates about orders, especially preorders that might be influenced. Preempt questions about order status by overcommunicating.

Few e-commerce retailers are immune to the impact of supply chain delays and shortages in 2022. Communicate specifically how these issues influence your company and customers will appreciate the added transparency.

What About Price Increases?

The second half of the one-two punch retailers are feeling right now is inflation and the near-universal increase in prices. If your suppliers are increasing prices, you’ll almost certainly need to do the same at some point, so how do you communicate these changes sincerely to maintain valuable customer relationships?

Plan Ahead – Communicate price changes as far in advance as possible to avoid sticker shock and backlash. Acknowledge that it’s not something you want to do, but that it’s a necessity in the current context, and provide clear, transparent reasoning behind any increases. While prices are increasing across almost all industries, this isn’t enough for most consumers, who are dealing with rising costs in all aspects of their life. Explain the need to maintain the integrity and quality of your brand and how an inevitable price change is part of that commitment.
Follow Up Frequently – Send additional messages as the price increase approaches so that all customers are given the chance to see the message and act accordingly (including ordering ahead of the scheduled change if they desire).
Keep Your Customers in Mind – Consumers are savvier than ever and will sense ulterior motives for a price increase if you are not transparent and considerate in how you approach the change. Did you just launch a new website, hire a bunch of employees, or launch a new headquarters? Price increases may send the wrong message as you experience visible growth and profit.

Taking a Proactive Approach to Minimize the Impact of Supply Chain Issues

Supply chain issues are expected to persist through 2022 and much of 2023 due to the ongoing inflation, the continued impact of COVID-19, and geopolitical upheaval such as the war in Ukraine. So how do you set your e-commerce business up for success as consumers start to tighten their wallets and place greater scrutiny on the companies with which they do business?

Implement Systems Designed for Delays

One of the most frustrating aspects of the supply chain crunch of the last two years has been how hard it became to get certain goods, many of which would be purchased and resold at high markups by third-party sellers. Implement reservation and preorder systems that reward loyal customers, reduce the risk of bots and resellers hoarding stock, and get goods into consumers’ hands. Revise systems to create a steady, reliable pipeline of products to your customers.

Be Proactive with Vendors

Supplies are limited across all industries, so it is the proactive, supply-savvy retailers who are finding the most success. Work with vendors to purchase materials and goods in a timely way. The just-in-time days of ordering a day or two before stock is needed are gone for now, and while it is risky to over-purchase, it’s becoming equally risky for many to wait as their websites fill up with out-of-stock notifications.

Building a Sustainable Business

E-commerce supply chain issues are having a direct impact on the bottom line of most American companies and will continue to do so for the next year or longer. To address these issues, it’s important to revisit how you communicate with customers, buy and sell products, and manage expectations in an age of frequent, unprecedented upheaval. Those that take these extra steps will be in a much better position to succeed in continuing volatile market conditions in the months and years ahead.

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Clothing Tax – A State-by-State Guide

Mon, 21 Mar 2022 17:51:36 +0000

Sales tax on clothes varies significantly between states, with different tax rates, tax holidays, and general regulations on the level at which clothing is taxed. In some states, clothing is completely tax-exempt, while in others there are luxury thresholds at which clothing becomes taxable. In this guide, we’ll take a closer look at these thresholds and rules across different states.

For online retailers who sell clothing to different states, it is important to know at what level sales tax on shoes and clothes kick in.

Sales Tax on Clothing By State

Forty-six states now have some form of economic nexus law requiring out-of-state sellers to collect and remit sales tax on a certain volume of sales. Because sales tax on clothing is a unique situation that does not always match broader sales tax regulations, it’s important to know which states exempt clothing, which do not, and what applies.

Why is clothing different from other Tangible Personal Property (TPP)?

In most states, sales tax rates are determined by the definition of Tangible Personal Property, but clothing is unique. In four states, it is completely tax-exempt and in eight additional states, there is a partial exemption on sales tax on clothes. Adding more variables to the mix, there are several states in which tax holidays change from year to year, often coinciding with back-to-school or end-of-the-year holiday shopping seasons.

So when should you collect sales tax on clothes and shoes? Here’s a breakdown of state tax rates and requirements for clothing:

States with No Tax on Clothes

The only places in the United States, where clothing is completely exempt, are the four states in which there is no sales tax at all: Delaware, Montana, New Hampshire, and Oregon.

In any other state, when you buy clothes, tax may apply. Read on for details.

States with Limited Clothing Tax Exemptions

There are eight states in which only some clothing purchases are exempt from sales tax. These include:

Alaska

Alaska doesn’t have a statewide sales tax but does have municipal sales taxes in most of its local governments, meaning that in locations with a local sales tax, clothing is subject to normal sales taxes. In locations where there is not a local sales tax, then clothing isn’t taxed either.

Massachusetts

The Massachusetts tax on clothing uses a per-item limit. While all forms of athletic apparel and protective gear, and most accessories are taxable, standard clothing and shoes are tax-exempt up to $175 per item. Items that cost more than $175 are subject to tax.

Reference

Minnesota

When it comes to Minnesota sale tax, clothing has a blanket exemption, except for accessories, any type of fur clothing, sports apparel and equipment, and protective equipment and clothing. There is no price limit.

Reference

New Jersey

The New Jersey tax on clothing is similar to Minnesota in that all items are exempt regardless of cost except for equipment, accessories, any type of fur clothing, and sporting equipment or gear.

Reference

New York

With New York sales tax, clothing exceptions are a bit more complicated than the other partially exempt states. Like Massachusetts, New York State and New York City offer exemptions for most clothing items up to $110. Anything above this amount is considered a luxury item.

In addition, however, state sales taxes don’t apply to athletic equipment, any item or apparel used to repair or make apparel that is otherwise exempt, and any costumes or formal wear when rented.

The above exemptions apply to all state sales taxes, but not all local taxes. The following counties do offer local exemptions:

Chautauqua County
Chenango County
Columbia County
Delaware County
Greene County
Hamilton County
Tioga County
Wayne County
New York City

Reference

Pennsylvania

Pennsylvania tax on clothing tax are fairly generous. The state exempts all clothing sales from sales tax except for formal wear, sporting equipment, and anything made with or in imitation of fur.

Rhode Island

Rhode Island sales tax on clothing has a similar exemption cap to New York and Massachusetts, though, it is much higher at $250 per item. In addition, Rhode Island’s cap is different in that the tax levied only applies to the total amount paid above the $250 cap per item. So a $500 suit jacket, for example, would be taxed only on the $250 over the $250 cap. Other items that are taxable include protective equipment, sporting equipment and apparel, and costume masks.

Vermont

Vermont sales tax on clothing has a blanket exemption for all items except sporting equipment and apparel, protective equipment, and accessories.

States Offering Sales Tax Holidays on Apparel

While no other states offer broad exemptions from sales tax on clothing and footwear, there are 15 states in which sales tax holidays are observed for several weeks each year. Typically this is during back-to-school sales tax holidays. These include:

Alabama
Arkansas
Connecticut
Iowa
Maryland
Massachusetts
Mississippi
Missouri
New Mexico
Ohio
Oklahoma
South Carolina
Tennessee
Texas
Virginia

Sales tax holidays can change from year to year, both in duration and the amount that can be exempted when purchasing clothing. It’s best to check with individual state tax authorities to determine when sales tax holidays apply.

If you sell clothing and apparel, make sure you understand how these rules affect you and your customers. If you need consulting help or wish to outsource your tax compliance efforts, you can contact us at 866-400-2444. Our focus on small business, along with our attention to detail and accuracy related to the tax data and services we provide, can help save you money in the long run.

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