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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 rentals) 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 2 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 Items Clothing Over $ 100 Computers Exceeding $ 3500 School Supplies Over $ 100 Sports/Rec Equipment Over $ 50 Computer Supplies Over $ 250 Instructional Materials Over $ 300 3 Time to Prepare for North Carolina’s Seventh Annual Sales Tax Holiday August 1-3, 2008 A 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. gory.) 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- status. 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 jacket. 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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