SALES TAX TUESDAY 2018: Dog Days of Summer Holidays

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It seems like the Dog Days of Summer bring with them the trend to offer Sales Tax Holidays, in part because a lot of states think they should offer some 'relief' for  those people who are ‘hot under the collar’ about the idea of paying sales taxes on their back-to-school purchases being made.

Two states, with double-S's in their names, Tennessee and Mississippi, are among the states offering these Dog Days (Sales Tax) Holidays within the next week (from the original publication date of this article).

But before we look at the sales tax holiday for these two states I have to remind you that Sales Tax Tuesdays 2018 is a joint venture between Insightful Accountant and Avalara, the Sales Tax People.  We have teamed-up to provide you with features concerning every state jurisdiction with sales and use taxes in the United States.  While we travel around in our big 'Sales Tax Tuesday RV' from state to state to see the sights and pay sales tax all along the way, we sometimes break our 'travelin-ways' to bring you some breaking news about interesting sales tax facts that might otherwise get neglected if we simply stuck to our roadmap. 

Be aware, just because we cover a special topic about a state in one of these alternative articles doesn't mean that we will be ignoring that state in the future for one off our travel-related articles. So, we will still be visiting Mississippi and Tennessee in the future to give you the generics of their state sales tax facts, along with some exciting sights to see, places to visit, things to do and food to chow-down on in upcoming features.

Despite the fact that sales tax provides critical revenue for many states, and local jurisdictions (counties, cities and towns) as well. In some cases sales tax is the largest source of tax revenue so making sure every sales tax dollar is fundamentally important; however, many state legislatures have decided to give their taxpayers a brief break in sales tax liabilities in the form of these special holidays from time-to-time. 

Many states, as I mentioned earlier, seem to have these holidays near back-to-school time, while others set the holidays for the traditional 'holiday time of  year.'  Some states have only one holiday period per year, but others may have a two (or perhaps 3) holidays.

During the period of July 27 (12:01 am) through July 29 (11:59 pm), Tennessee will be granting a temporary reprieve from sales tax covering a significant number of products including clothing and footwear costing $100 or less. Their exemption also covers computers priced at $1500 or less (excluding software) and school supplies (including art supplies) priced at $100 or less. This link provides a detailed (PDF) list of Exempt Items under Tennessee's Sales Tax Holiday.

One unique provision of the Tennessee holiday concerns their taxation (or lack thereof) for 'layaway' items. A qualifying item that was placed into a layaway plan at any time prior to the Sales Tax Holiday will qualify for exclusion on the full purchase price (as limited by the holiday provisions) if the final payment is paid during the Sales Tax Holiday. In addition, if you initiate a new layaway plan during the Sales Tax Holiday period, the sales tax exclusion will apply even if the final payment is made any time after the actual Sales Tax Holiday.

For more (general) information see the website for the Tennessee Department of Revenue Sales Tax Holiday.

But Tennessee isn't the only state with an upcoming sales tax holiday.  Mississippi is also having a Dog Days of Summer Sales Tax Holiday which they promote as the 'Mississippi Tax Free Weekend'. 

The Mississippi holiday runs from 12:01 am on July 27 through midnight on July 28, 2018.  The state exempts qualifying clothing and footwear priced less than $100. Note the slight different here...less than $100 in contrast to the Tennessee $100 and less. This is potentially a significant point of failure to collect sales taxes properly if a merchant isn't careful.  For specific guidelines as to what constitutes 'qualifying' articles be sure to consult the list of eligible and non-eligible items included in the state's 'Official Guide to the Sales Tax Holiday.'

Unlike Tennessee, Mississippi does NOT recognize layaway sales as being eligible for the holiday (nor does it recognize rentals of otherwise eligible items as being exempt from sales tax during the holiday).  Neither does Mississippi recognize 'rain checks' issued during the holiday period as being valid for sales tax exemption at the time the article is actually purchased after the holiday period.

Even when it comes to sales tax holidays it's easy to get lured into a false sense of compliance believing that you are exempting the proper items in the proper way from sales tax collection for the two or three days the holiday is being observed. But all too often retailers make a mistake and the way that an items has been coded in their manual accounting or point-of-sale software leads to an improper failure to collect tax that was due  Automation via Avalara allows businesses to rely on the 'experts' when it comes to sales tax compliance, you won't be sacrificing time or productivity to be fully compliant with every sales tax change that impacts your business.