Back to school time brings lots of expenses to families with children: registration fees, supplies, and clothing. With the Iowa sales tax rate now at 7 percent in many Iowa communities, families may want to take advantage of the Sales Tax Holiday weekend to help with back-to-school costs.
What purchases will be exempt from tax? All clothing and footwear priced under $100 will be exempt from sales tax (including school and local option sales tax) on Friday Aug. 5 and Saturday, Aug. 6. The exemption applies to each item priced under $100 regardless of how many items are sold to a customer.
Clothing does not include: watches, watchbands, jewelry, umbrellas, handkerchiefs, sporting equipment, skis, swim fins, roller blades, skates, or any special clothing or footwear designed primarily for athletic activity or protective use and not usually considered appropriate for everyday wear. Articles normally sold as a unit must continue to be sold as a unit (pair of shoes, suit, etc.). They cannot be sold as individual items to get the sales tax exemption.
Manufacturer's coupons do not reduce the sales price of an item. Therefore, a manufacturer's coupon cannot be used to reduce the selling price of an item to less than $100 in order to qualify for the tax exemption. Store coupons and discounts can be used to reduce the sales price of an item to less than $100. Eligible items purchased by mail order, catalog, or over the Internet can receive the exemption. New this year is an exemption for items ordered and paid for during the exemption period, but delivered after the Sales Tax Holiday.
Another change for 2005 applies to layaway sales. Eligible items qualify for the exemption if the customer takes delivery of the item during the exemption period or puts the merchandise on layaway with final payment and delivery made after the Sales Tax Holiday.
If you purchase an eligible item during the exemption period, then later exchange the item for the same item (different size, different color, etc.), no additional tax will be due even if the exchange is made after the exemption period. But if you purchase an eligible item during the exemption period, then later return it and receive credit on the purchase of a different item, sales tax will apply to the full sales price of the newly-purchased item.
The details of the sales tax holiday, including a list of what items are exempt, can be found at this State of Iowa website: http://www.state.ia.us/tax/educate/holid...