Annual sales tax free weekend returns
Back to school time brings lots of expenses to families with children: registration fees, supplies, and clothing. Again this year, Iowa families can take advantage of the Sales Tax Holiday weekend to help with back to school costs. This is Iowa's fourth annual Sales Tax Holiday.
Each year the state finance department estimates that customers paid between $1 million and $1.6 million less in sales taxes during the Sales Tax Holiday.
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. 1, and Saturday, Aug. 2. 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.
Manufacturers coupons do not reduce the sales price of an item. Therefore, a manufacturers 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 or catalog, including transactions over the Internet, can receive the exemption if the order is delivered during the exemption period.
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 web site: www.state.ia.us/tax. The web site explains how to handle the following situations: articles normally sold as a unit, gift certificates, sets with both exempt and taxable items, rain checks, buy one, get one free or for a reduced price, layaway sales, exchanging a tax-exempt purchase after Aug. 3, refunds, returning an eligible item, mail order sales, as well as coupons, rebates and discounts.
Businesses are also reminded that this is an annual event commencing Friday, Aug. 1, at 12 a.m. and concluding Saturday, Aug. 2, at 12 midnight. The holiday does not include Sunday; businesses should resume charging sales tax. Businesses that are open on these days are required to participate. Businesses can never advertise that they will pay or otherwise absorb the sales tax on items. When completing the business's tax return, list qualifying Sales Tax Holiday sales on the "exemptions" line.