Sales Tax Holiday
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.
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).
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.
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.