; The following is a list of taxed and not-taxed items for the Sales
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The following is a list of taxed and not-taxed items for the Sales


  • pg 1
									                  The following is a list of taxed and not-taxed
                        items for the Sales Tax Holiday
                                   August 1-3

     This poster provides information on the application of sales and use tax for the sales holiday period
     provided by G.S. 105-164.13C. During the sales tax holiday period, retail sales of specified articles of
     merchandise are exempt from both state and local sales and use tax.

     Holiday Period
     The sales tax holiday begins immediately after midnight Thursday, which is 12:01 a.m. on Friday,
     August 1st and runs through 11:59 p.m. on Sunday, August 3rd, 2008.

                               Items Are Grouped by Category

                                     Clothing Items Not-Taxed
                                          ($100 or less per item)
    Aprons (household and shop)       Formal Wear (excludes rentals)     Rubber pants
    Athletic supporters               Garters and garter belts           Sandals
    Baby receiving blankets           Girdles                            Scarves
    Bandannas                         Gloves and mittens                 Shoes and shoelaces
    Bathing suits and caps            Hats and caps                      Slippers
    Beach coverups                    Hosiery                            Sneakers
    Belts and suspenders              Insoles for shoes                  Socks and stockings
    Boots                             Jogging suits                      Steel-toed shoes
    Coats, jackets, capes, etc.       Lab coats                          Sweaters
    Costumes                          Leotards and tights                Underwear
    Diapers (children and adult,      Neckties                           Uniforms (athletic, boy scouts,
    including non-disposables)        Overshoes                          etc. and non-athletic for
    Earmuffs                          Pantyhose                          business use)
    Footlets                          Rainwear                           Wedding apparel (excludes

                                             Sport or Recreational Equipment Not-Taxed
                                                                ($50 or less per item)

                                          Ballet and tap shoes                Life preservers and vests
                                          Cleated or spiked athletic shoes    Mouth guards
                                          Gloves (baseball, bowling,          Roller and ice skates
                                          boxing, hockey, golf, etc)          Shin guards
                                          Goggles                             Shoulder pads
                                          Hand and elbow guards               Ski boots
                                          Helmets (bicycle, skating,          Waders
                                          baseball, etc.)                     Wetsuits and fins
                    Certain School Supplies Not-Taxed
                 ($100 or less per item for classroom or home use)
Binders                              Folders                             Paper
Blackboard chalk                     Glue, paste and paste sticks        Pencils (and
Book bags                            Highlighters                        boxes and
Calculators                          Index cards & index card boxes      sharpeners)
Cellophane tape                      Legal pads                          Pens
Clay and glazes                      Lunch boxes                         Protractors
Compasses                            Markers                             Rulers
Composition books                    Notebooks                           Scissors
Crayons                              Paintbrushes for artwork            Sketch and drawing pads
Erasers                              Paints (acrylic, tempora and oil)   Watercolors

                    Certain School Instructional Materials Not-Taxed
                            ($300 or less per item for classroom or home use)
    Reference Books (Dictionaries, Thesauruses)
    Reference maps and globes

                                     Computers Not-Taxed
                                      ($3,500 or less per item)
Computers: For purposes of the tax exemption, a computer includes a monitor, keyboard, mouse,
speakers and cables when sold in conjunction with a central processing unit is not taxed.

                       Certain Computer Accessories Not-Taxed
                                        ($250 or less per item)

Computer Storage Media (includes diskettes,            PDA’s (excluding cell phones)
  compact discs, USB Flash Drives)                     Printers &Printer Supplies (includes paper and ink)

                                              Taxed Items
Clothing Accessories                 Computer items: monitors,           Protective Equipment
 Cosmetics                           keyboards, speakers, mouse and       Breathing masks
 Hair notions                        cables are taxed when not sold       Ear and hearing protection
  (barrettes, hair bows, hairnets)   with a central processing unit)      Face shields
 Handbags                            Other                                Finger guards
 Handkerchiefs                        Appliances                          Hard hats
 Jewelry                              Bedspreads and sheets               Print or dust respirators
 Sunglasses (nonprescription)         Canned computer software            Protective gloves
 Umbrellas                            Furniture                           Safety and tool belts
 Wallets                              Non-educational reading             Safety glasses and goggles
 Watches                                materials (books, magazines)      Uniforms (for business use)
 Wigs and hair pieces                                                     Welders’ gloves and masks

                                         Overview of Taxed
            Clothing Over $ 100        Computers Exceeding $ 3500               School Supplies Over $ 100
Sports/Rec Equipment Over $ 50        Computer Supplies Over $ 250       Instructional Materials Over $ 300
                  Time to Prepare for North Carolina’s
                    Seventh Annual Sales Tax Holiday
                           August 1-3, 2008

             ugust will be here before you know it     vide a comprehensive list of taxable and tax-free
             and there’s never a better time than      items, and pages 4-6 provide examples of how the
             the present to start planning for what    law applies to gift certificates, coupons, layaways
             will prove to be a very busy weekend      and more.
for retailers. North Carolina’s Sales Tax Holi-
day is one of the biggest shopping weekends of         More Facts About The Sales Tax Holiday
the year and it’s time to start thinking about your    from the Department of Revenue
stock supply as well as preparing your employees       Retailers may not charge sales taxes and require tax-
to handle the exorbitant sales                                          payers to request refunds of those
you’ll experience in just a few                                         taxes, either from the retailer or the
months time.                                                            Department of Revenue. In cases
  During this weekend, certain                                          where the sales taxes are charged dur-
items are free from sales tax to                                        ing the holiday on purchases that
help consumers with back-to-                                            should be exempt, the purchaser’s
school shopping. But the shopping                                       only option for a refund is the retailer.
doesn’t just impact stores; the sales                                     Participation in the sales tax holiday
tax holiday also applies to items                                       is required. Retailers may not “opt
ordered via mail, telephone and the                                     out” of the holiday.
internet.                                                                 Discounts from retailers’ coupons
  The North Carolina General As-                                        are deducted from the price of an item
sembly created the first sales tax                                      before you determine if the item is
holiday in 2002. Since then, there have been mi-       eligible for the sales tax exemption. Example: a cus-
nor changes made to it over the years. Such a          tomer buys a dress priced at $105 and uses a coupon
change was made during the 2007 Legislative            for a 10 percent discount. That makes the sales price
Session. New this year, the sales tax holiday will     of the item of clothing $94.50 ($105 - $10.50 =
include school instructional materials costing         $94.50) and exempt from sales tax during the holi-
$300 or less per item. This includes reference         day. Manufacturers’ coupons are treated just the op-
books (dictionaries, thesauruses, etc.), reference     posite way; they are not deducted from the sales price
maps and globes, textbooks and workbooks.              before determining eligibility for sales tax exemp-
These items originally fell under the school sup-      tion.
plies list of $100 or less per item.                     Rebates do not affect the sales price of an item for
  The items exempt from sales tax have otherwise       the sales tax holiday. Example: a computer priced
not changed. Computer parts such as the moni-          at $3,550 with a $200 rebate is not exempt from sales
tor, keyboard, mouse, speakers and cables are not      taxes because the sales price of $3,550 is unchanged
taxed when sold with the central processing unit       by the rebate.
(CPU), but are taxed when sold separately.
Please note that the exemptions for school sup-         If you have additional questions regarding the Sales
plies, school instructional materials and computer     Tax Holiday, please feel free to contact us at
supplies only apply to those items found on the        (919) 832-0811. We are happy to provide this infor-
correlating lists herein. (Art supplies that are not   mation in hard copy. You may also contact the Tax-
taxed have been specifically referenced rather         payer Assistance and Collections Center at 1-877-
than placing them in a general “art supply” cate-      252-3052 if you have any questions about this issue.

What You Need to Know
 This email provides everything you need to
prepare both you and your employees for the up-
coming Sales Tax Holiday. Pages 1 and 2 pro-
    Applying the Law to Sales Transactions During Sales Tax Holiday
 ARTICLES NORMALLY SOLD                  The store cannot sell each pair        the item and receives credit on
        AS A UNIT                        of pants for $55 in order for the      the purchase of a different item,
                                         items to be tax-free. However,         the appropriate sales tax will ap-
Articles that are normally sold as
                                         the retailer may advertise and         ply to the full sales price of the
a unit must continue to be sold in
                                         sell the items for 50% off, sell-      newly purchased item.
that manner; they cannot be
separated and sold as individual         ing each pair of $110 pants for
                                         $55, making each pair tax-free.        EXAMPLE 1: During the sales
items, in order to receive tax-free
                                                                                tax holiday, a customer pur-
                                         EXAMPLE 2: A retailer adver-           chases an $85 dress that is un-
EXAMPLE 1: A pair of shoes               tises shoes as “buy one pair at        taxed. Later, during the sales tax
normally sells for $120. The pair        the regular price, get a second        holiday, the customer exchanges
cannot be split in order to sell         pair for half price.” The first pair   the $85 dress for a $125 dress.
each shoe for $60.00 to be con-          of shoes is sold for $120; the         Tax is due on the $125 dress.
sidered tax-free.                        second pair is sold for $60 (half      The $85 credit from the returned
                                         price). Tax is due on the $120         dress cannot be used to reduce
                 EXAMPLE 2: A            shoes, but not on the $60              the sales price of the $125 dress
                 suit is normally        shoes. The store cannot aver-          to $40 for tax-free status.
                 priced at $125 on       age the price of both pairs and
                 a single price tag.     sell each pair of shoes for $90        EXAMPLE 2: A customer pur-
                 The suit cannot         in order for the items to be un-       chases a $35 shirt during the
                 be split into sepa-     taxed. However, a retailer may         sales tax holiday. After the sales
                 rate articles so        advertise each pair for 25% off,       tax holiday, the customer ex-
                 that any of the         thereby selling each pair of           changes the shirt for a $35
                 components may          $120 shoes for $90, making             jacket. Since the jacket was not
                 be sold for $100        each pair tax-free.                    purchased during the sales tax
                 or less in order to                                            holiday, tax is due on the $35
                 be tax-free. How-                                              price of the jacket.
                 ever, components
that are normally priced as sepa-                                                          REFUNDS
rate articles may continue to be                                                A customer who pays sales tax to
sold as separate articles and be                                                a retailer on a tax-free item when
tax-free if the price of an article is                                          no tax is due must request a re-
$100 or less.                                                                   fund of the tax from the retailer
                                            EXCHANGING A TAX                    and not from the
                                         EXEMPT PURCHASE AFTER                  Department of Revenue.
         BUY ONE,                              AUGUST 3RD
    GET ONE FREE SALES                   When a customer purchases an              LIMIT ON TAX REFUNDS
The total price of items adver-          untaxed item during the sales                TO CUSTOMERS
tised as “buy one, get one free,”        tax holiday, then later ex-            For 60 days following the end of
or “buy one, get one for a re-           changes the item for the same          the sales tax holiday, when a pur-
duced price,” cannot be averaged         item (different size, different        chaser returns an item that would
in order for both items to be tax-       color, etc.), no additional tax will   have been tax-free if purchased
free.                                    be due even if the exchange is         during the holiday weekend, the
                                         made after the sales tax holi-         retailer may not refund or give
EXAMPLE 1: A retailer adver-             day.                                   credit for any sales tax on the
tises pants as “buy one, get one                                                item unless the customer either
free.” The first pair of pants is        When a customer purchases an           provides a receipt showing pay-
priced at $110; the second pair of       untaxed item during the sales          ment of the tax or the retailer has
pants is free. Tax is due on $110.       tax holiday, then later returns        other evidence to document pay-
   Applying the Law to Sales Transactions During Sales Tax Holiday

                                        EXAMPLE 3: A jacket sells for                     RAIN CHECKS
                                        $105. The customer receives a           Untaxed items purchased during
                                        $10 rebate from the manufac-            the sales tax holiday using a rain
                                        turer. Since the rebate occurs          check will be tax-free regardless
                                        after the sale, it does not reduce      of when the rain check was origi-
                                        the sales price of the shirt. Tax       nally issued. If a rain check is is-
                                                                                sued during the sales tax holiday
  COUPONS, REBATES AND                                                          but the item is actually purchased
       DISCOUNTS                                                                after the holiday period has
                                                                                ended, the items purchased will
Manufacturer’s coupons can not
                                                                                be subject to sales tax.
be used to reduce the sales price
of an item for the item to be con-
sidered tax-free.

EXAMPLE 1: A jacket regularly
sells for $105. The customer has
a $10 manufacturer’s coupon             is due on $105.
good for the purchase of the
jacket. The manufacturer’s cou-              GIFT CERTIFICATES
pon does not reduce the sales
                                        The sale of a gift card or gift
price of the jacket. Tax is due on
                                        certificate is not taxable. Eligible               LAYAWAYS
$105 even though the customer
                                        tax-free items purchased during         An item placed in a layaway or
only pays the retailer $95 for the
                                        the sales tax holiday using a gift      similar deferred payment plan is
                                        card or gift certificate will be tax-   untaxed if the eligible item is se-
Store coupons and discounts,            free, regardless of when the gift       lected by the customer and the
however, do reduce the sales            certificate was purchased. If a         order is accepted by the retailer
price of an item. Therefore, a          gift certificate or gift card was       during the sales tax holiday, even
store coupon or discount can be         purchased during the sales tax          if the customer issues the final
used to reduce the sales price of       holiday but redeemed after the          payment after the holiday period.
an item to $100 or less in order        holiday period has ended, the           If a customer issues the final pay-
for the item to be untaxed.             items purchased with the card           ment during the sales tax holiday
EXAMPLE 2: A customer buys a            or certificate are taxed as usual.      on an eligible item that was
$400 suit and a $110 shirt. The         A gift certificate cannot be used       placed in a layaway plan prior to
retailer is offering a 10% dis-         to reduce the selling price of an       the sales tax holiday, the item is
count. After applying the 10%           item to $100 or less in order for       untaxed.
discount, the final sales price of      the item to qualify for the ex-
the suit is $360, and the sales         emption.                                EXAMPLE 1: A customer shops
price of the shirt is $99. The suit                                             at your store during the three-day
is taxable since it is over $100                                                sales tax holiday and chooses to
and the shirt is tax-free since it is                                           place her purchase in a layaway
less than $100.                                                                 plan not to be paid until after the
                                                                                sales tax holiday. If the item would
Rebates do not affect the sales                                                 be untaxed during the sales tax
price of an item.                                                               holiday, the item would be un-
                                                                                taxed upon final payment.
    Applying the Law to Sales Transactions During Sales Tax Holiday

EXAMPLE 2: A customer shops           Most retailers are only able to         The seller must tax the percent-
at your store during the three-       change their tax application sys-       age of the delivery charge allo-
day sales tax holiday and             tems for an entire day and not for      cated to the taxable items but
chooses to purchase a pair of         portions of a day. The time zone        does not have to tax the percent-
$55 pants that she placed on          of the seller’s location determines     age allocated to the untaxed
layaway the week before. This         the authorized time period for the      items.
sale is untaxed.                      holiday when the buyer and seller
                                      are located in different time
            RENTALS                   zones.
Rentals of eligible items do not
qualify for tax-free status.              SHIPPING AND HANDLING
                                      Delivery charges, including ship-
     MAIL ORDER SALES                 ping, handling, and service
Sales of eligible items by mail       charges, are part of the sales
order, telephone, Internet, or        price of untaxed merchandise.
other remote means are un-
taxed, even if the seller does        For the purpose of determining a
not have a store within the state     sales tax holiday price threshold,
                                      if all the merchandise in a ship-                 THRESHOLD
of North Carolina. For the pur-
pose of the sales tax holiday, an     ment qualifies as tax-free and the      When the sales price of an item is
item is untaxed if the following      sales price for each item in the        greater than the threshold amount
occurs during the holiday week-       shipment is within the sales tax        set for the sales price of an ex-
end:                                  holiday price threshold, then the       empt item, whether the threshold
                                      seller does not have to allocate        is $50, $100, $250, $300 or
•   The customer orders and           the delivery, handling, or service      $3,500, sales tax is due on the
    pays for the item. A cus-         charge to determine if the price        entire charge for the item. The
    tomer pays for an item when       threshold is exceeded. The ship-        sales price is not reduced by the
    the seller receives a credit or   ment will be considered a sale of       threshold amount. For example, if
    debit card number, a check,       untaxed items.                          a coat is sold for $120, the entire
    or a money order.                                                         sales price of the coat is taxable
                                      If the shipment includes taxed          and not just the amount that ex-
                                      and untaxed items (including an         ceeds $100.
•   The retailer accepts the or-
                                      untaxed item with a sales price in
    der and takes an action to
                                      excess of the price threshold),
    fulfill the order for immediate
                                      the seller should allocate the de-       RECORDS AND REPORTING
    delivery. The actual delivery
                                      livery charge by using:                 As a reminder, beginning in 2006
    can occur after the holiday.
                                      •   a percentage based on the           and continuing again this year, the
                                          total sales price of the taxable    form E-599H is no longer required
                                          merchandise compared to the         for any item with a sales price of
                                          total sales price of all items in   $1,000 or more. No special record
                                          the shipment; or                    keeping or reporting is necessary.
                                      •   a percentage based on the
                                          total weight of the taxable
                                          items compared to the total
                                          weight of all merchandise in
                                          the shipment.

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