Arkansas sets sales tax holiday for Aug. 4-5

Arkansas sets sales tax holiday for Aug. 4-5

Parents, students can save on back- to- school shopping in Arkansas first weekend in August

ralphhardin@gmail.com In 2011, the Arkansas State Legislature passed a bill creating a sales tax holiday one weekend each year.

Act 757 provides for and sets the sales tax holiday in Arkansas during the first weekend of August each year. A sales tax holiday is a temporary period when state and local sales taxes are not collected or paid on the purchase of certain products, specific to the Arkansas holiday, the suspension of sales taxes applies to back-to-school items, such as school supplies, clothing and shoes, certain electronics and other items outlined in the letter of the act.

This year, the Arkansas sales tax holiday for will begin on Saturday, Aug. 4, at 12:01 a.m., and will continue through Sunday, Aug. 5, at 11:59 p.m. State and local sales tax will not be collected during this 48hour period.

Certain limitations apply on some items:

• Clothing and footwear purchases are tax-free only if the sales price is less than $100 (per item).

• Clothing accessories and equipment only if the sales price is less than $50 (per item).

• There is no price limit on school supplies, school art supplies, or school instructional materials.

The Department of Finance and Administration has supplied retailers with instructions on which items qualify for the sales tax exemption.

For purposes of the holiday period, the following definitions apply:

• Clothing – Any article of human wearing apparel suitable for general use.

• Clothing Accessories or Equipment – An item worn on the person or in conjunction with clothing.

• School Supply – An item commonly used by a student in a course of study.

See the product definition list for the specific items that are eligible for the sales tax exemption when purchased during the holiday period.

• School Art Supply – An item commonly used by a student in the course of study for artwork. • School Instructional Materials – Written materials commonly used by a student in a course of study as a reference and to learn the subject being taught.

All Arkansas Retailers are required to participate if selling merchandise eligible for the holiday exemption and may not charge tax on items that are legally tax exempt during the sales tax holiday period.

“The holiday exemption for clothing is limited to single articles with a price of less than $100,” the DFA explained in a letter sent out to retailers statewide.

“Items priced at $100 or more are subject to the full state and local sales tax.”

For example, the letter explained, a customer purchases two shirts at $50 each, a pair of jeans at $75, and a pair of shoes at $125.

No state and local sales tax is due on the two shirts or the pair of jeans, even though the total cost ($175) exceeds the $100 threshold. However, the state and local sales tax will be due on the full purchase price ($125) of the shoes since they exceed the threshold.

Other caveats to consider:

• Items normally sold as a single unit, such as a pair of shoes or a men’s suit, must continue to be sold as a single unit. Components cannot be priced separately and sold as individual items in order to qualify for the holiday exemption.

• The total price of items advertised as “buy one, get one free” or “buy one, get one for a reduced price” cannot be averaged to qualify both items for the holiday. The amount of sales tax due depends on the actual price paid for each item sold. Example: If a retailer advertises a pair of blue jeans as “buy one, get one 50% off” with the first pair of jeans priced at $120 and the second pair at the half- price of $60. Sales tax is due on the first pair priced at $120 with the second pair priced at $60 being eligible for the holiday

exemption.

• Retailers may offer store discounts and store coupons to reduce the selling price of an eligible item in order to qualify for the holiday exemption. However, manufacturer’s discount coupons do not reduce the selling price of an item and cannot be used to determine the selling price of an item in order to qualify for the holiday exemption.

• Sales of eligible items under a layaway sale qualifies for exemption if final payment on a layaway order is made by, and the property is given to, the purchaser during the exemption period; or the purchaser selects the property and the retailer accepts the order for the item during the exemption period, for immediate delivery upon full payment, even if delivery is made after the holiday exemption period ends.

• A rain check allows a customer to purchase an item at a certain price at a later time because the particular item was out of stock.

Notes on Exchanges: Procedures for an exchange in regards to a sales tax holiday are as follows: a) If a customer purchases an eligible item during the holiday exemption period but later exchanges the item for a similar eligible item, even if a different size, color, or other feature, no tax is due even if the exchange is made after the holiday period.

b) If a customer purchases an eligible item during the holiday exemption period, but after the holiday has ended, the customer returns the item and receives credit on the purchase of a different item that was not eligible during the holiday, the appropriate state and local sales tax is due on the sale of the newly purchased item.

c) If a customer purchases an eligible item prior to the holiday exemption period, but during the holiday period the customer returns the item and receives credit on the purchase of a different item of eligible property, no sales tax is due on the sale of the new item if the new item is purchased during the holiday exemption period.

Notes on Online Purchases:

Delivery charges, including shipping, handling and service charges, are part of the sales price of eligible items. For the purpose of determining a sales tax holiday price threshold, if all of the items in a shipment qualify as eligible property and the sales price for each item in the shipment is within the sales tax holiday price threshold, the retailer will not allocate the delivery, handling, or service charge to each item in order to determine if the price threshold is exceeded.

The shipment will be considered a sale of eligible products. If the shipment includes eligible holiday sales tax exempt items and other taxable items, the retailer seller should allocate the delivery charge by using a percentage based on the total sales prices of the taxable items compared to the total sales prices of all items in the shipment.

For those who shop across the river, the 2018 tax holiday in Tennessee will begin on Friday, Aug. 3 and extend through Sunday, Aug. 5.

Mississippi’s sales tax holidays for 2018 is a week earlier than Arkansas and Tennessee, taking place July 27-28. In all, 16 states will hold sales tax holidays over the next several weeks (Alaska, Delaware, Montana, New Hampshire and Oregon do not collect sales tax). Guidelines and restrictions differ from state to state.

By Ralph Hardin

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