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Texas Sales Tax Holiday: What Counts, What Doesn’t – August 7-9 2015

Just in time for back-to-school purchases, the annual Sales Tax Holiday saves shoppers about $8 for every $100 spent on most clothing, footwear, school supplies, and backpacks. Tax exemptions include items sold via retail, online, mail or phone, and includes lay-away plans. But before you head to the mall or click that link, take note of the disclaimers:

Clothing & Footwear

  • The tax exemption is for items that sell for less than $100 each. So, the total purchase qualifies if each item is less than $100. But sales tax applies for single items, such as shoes, that cost more than $100.
  • Clothing and footwear that are designed specifically for an athletic activity or athletic protection don’t qualify if the wearing is exclusive to the athletic event. For example, cleats don’t count for exemption, but general tennis shoes qualify.
  • Clothing or footwear rental, alterations, cleaning, accessories, purses, jewelry, wallets and watches are not included in the tax exemption.

Backpacks

  • Qualifying backpacks must be under $100. Backpacks for elementary and secondary students include messenger bags and those with wheels as long as they have straps for alternate wearing on the back.
  • Non-qualifying items include: framed backpacks (such as for hiking), briefcases, luggage, athletic duffle or gym bags, and computer bags.
  • Limit for tax-free purchase is 10 backpacks, unless the person has a tax exemption certificate.

School Supplies

  • School supplies for elementary and secondary students priced less than $100 are sales-tax exempt.
  • The tax exemption is for personal use, not business use. An exemption certificate is required if the purchaser uses a business credit card or check, bills the purchase to a business account at the retailer, or uses a business membership to purchase at a member-based retailer.

Rain checks or Layaway

  • If the customer cashes in a rain check during the tax-free weekend, then the qualifying purchase is tax-free.
  • A rain check issued during the tax-free weekend is subject to tax for actual purchase made after the weekend. (The exemption doesn’t ‘travel’ with the rain check.)
  • Tax exemption applies to items placed on layaway during the tax-free weekend and/or purchases for which the final payment occurs on the tax-free weekend.

Retailers have rules, too. A business is not allowed to ‘pay’ the sales tax for non-qualifying items. However, they may put an item on sale and include the tax in the sales price. Retailers also have to follow specific reporting rules for sales of tax-free items.