TAX NEWS - 2010

Tennessee Tax: Sales Tax Holiday Approaching

August usually means two things for kids and their parents - school is back in session and school supplies go on sale. But the latter need not be such an expensive prospect if parents take advantage of the annual Sales Tax Holiday which gets underway the first weekend in August.

Governor Phil Bredesen established the tax holiday in 2006 as a way to help families save on items they need to be ready for a successful school year.

This year, the sales tax holiday starts at 12:01 a.m. on Friday, August 6. It will continue until 11:59 p.m. on Sunday, August 8. It offers shoppers nearly 10% off the prices typically paid for exempt items.

Shoppers will not pay any state or local sales tax on clothing items, school supplies and art supplies that cost $100 or less per item during the holiday. Computers with a price of $1500 or less are also exempt from tax during the holiday.

The state reimburses local governments for lost tax revenue.

A number of clothing items are included in the exemption such as shirts, pants, dresses, jackets, hats, socks and undergarments, shoes and boots.

Several items unexpected items are also on the list like baby clothes, bibs, and baby diapers- including cloth or disposable, swimsuits and aprons.

Brides shopping for their wedding ensemble should also take note of the tax free sales—wedding apparel, including bridal gowns, bridesmaid dresses, slips and veils are all included in the tax exemption. Purchased tuxedos—but not rentals—are also tax exempt during the holiday. Just be sure to remember that there is a $100 limit per item.

Graduation caps and gowns, school uniforms and sports jerseys, scout uniforms, clerical garments and choir robes are also exempt.

Numerous school and art supplies are exempt from tax during the sales tax weekend. Some of these include crayons, paper, pens and pencils, markers, backpacks, calculators, erasers, folders, glue, clay, index cards, paint and brushes, lunch boxes and notebooks.

There are no limits to the number of tax exempt items that may be purchased by a single shopper, as long as the purchase price of each item is below the price threshold ($100 for clothing and supplies, $1500 for computers).

Shoppers who don't want to leave home can also take advantage of the sales tax holiday. The exemption includes purchases of qualified items sold via mail, telephone, e-mail or Internet, if the customer orders and pays for the item and the retailer accepts the order during the holiday for immediate shipment, even if delivery is made after the exemption period.

Another popular option is lay-a-way and it can be an added benefit for tax-free shoppers. Items removed from lay-a-way during the exemption period are not taxed, and items placed in lay-a-way during the period are likewise free from tax, even if the final payment on the items is made after the holiday ends.

Items that are not exempt from tax this weekend include accessories such as purses and handbags, belt buckles, wallets, watches, sunglasses, and sports and recreational equipment like tap shoes, cleats, roller skates, baseball gloves and helmets. Computer software or equipment not purchased as part of a bundle is not exempt. Keyboards, printers, monitors, and other peripherals will be taxed if purchased separately from the computer CPU.

Items purchased for business use are likewise not exempt. Individuals making such a purchase and not charged tax by the retailer should report it as use tax on the business return.

There are several local businesses where shoppers can take advantage of tax-free spending sprees, sharing hard earned dollars with friends and neighbors and avoiding a long drive outside of the county.

Lori's Family Footwear in Parsons offers shoes and athletic clothing. The Print Shop sells school supplies such as paper, pens, markers and folders while Bills Men's Shop sells apparel including pants, shirts, shoes and tuxedoes. Discount retailers Dollar General and Fred's also sell clothing items and baby items that are exempt during the holiday, as well as school supplies.

Further details about the state's special Sales Tax Holiday are available at the state's dedicated Web site, www.tntaxholiday.com. The Tennessee Department of Revenue also offers assistance to consumers via e-mail, at Salestax.Holiday@state.tn.us, and through its toll-free statewide telephone hot line, (800) 342-1003. Staff is available to answer questions Monday through Friday 7 a.m. to 5 p.m. Central Time.