Mention state sales tax and eyes are sure to glaze over. Sure, the ins and outs of state taxes are complex (and boring). But there’s one aspect of them that’s super exciting: State Tax Holidays. And, the states themselves establish each sales tax holiday theme, so all you need to do is hitch your marketing wagon to it.
Let me explain. Most state tax holidays are tied to back-to-school, and exempt online shoppers from sales tax on basic school necessities, including clothes or computers. These tax holidays typically occur in the month leading up to the start of school. This gives you a great excuse to advertise a very specific and limited event — no sales tax on specific days — and bring customers to your store.
But back-to-school isn’t the only theme. Some states focus on other priorities that are relevant to their residents, such as hurricane preparedness (Florida, Louisiana), the start of hunting season (Louisiana), or very hot weather (Texas). These states offer sales tax-free shopping on items such generators, ammunition and energy-star air conditioners respectively.
All state tax holidays are short in duration, lasting just two to three days in most cases. All states impose limits on the types of products that can be purchased tax free, as well as spending thresholds. For a complete list of tax free holidays (dates, items covered and spending caps), click here.
How to Make State Tax Holidays Work for Your Store
Tired of generic promotions, like “Summer Sale” or “Fall Blowout”? State tax holidays are a great marketing opportunity to add a new twist to your campaigns. If, for instance, you sell school supplies to customers in say, Iowa, you can let them know that on August 3rd and 4th, they can purchase up to $100 worth of school supplies and pay no sales tax.
- Create a page with eligible items on your website by holiday.
- Call out the state tax holiday on the product pages of eligible products.
- Use your ad campaigns to inform eligible people of the tax free holiday, and drive them to your store.
Note: To ensure a positive experience, take care to target only eligible consumers. You don’t want to promote Texas’ tax exemption on A/C units to residents in Arkansas or Florida or other sweltering states.
Changing State-Tax Laws?
You may wonder what state tax holidays have to do with online retailers, since consumers don’t even pay state tax when they buy online. Don’t expect that status to last much longer. In South Dakota v. Wayfair, U.S. Supreme Court rejected the notion that collecting sales tax is too onerous for online retailers, and that South Dakota is well within its rights to require Wayfair.com to comply with state tax laws when selling to its residents. This is a new precedent set by the highest court in the land, and as our partner, Vertex explains in its June 21 blog post:
“The recent U.S. Supreme Court ruling in South Dakota v. Wayfair overturning the long-held Quill decision will dramatically change the landscape for online sellers when it comes to sales tax. It’s likely that the states will now increase their efforts to collect sales tax on online sales.”
This means you face a more complex future.
A Word on Vertex
If you don’t have tax software, Something Digital recommends Vertex, which is built into Magento as of version 2.2.5. Vertex streamlines the complexity of state’s sales tax (which you may be required to collect as a result of South Dakota v. Wayfair).
And complex it is! Consider that sales tax laws differ from state to state, county to county, and even ZIP code to ZIP code. In fact, sale tax laws can even differ within a given ZIP code as townships and towns can tax the same item differently. Classic example: depending on where you live, a Snickers bar may be taxable, but not so a Twix bar. Why? Because Snickers is technically a candy bar, whereas Twix is technically a cookie, and may be subjected to different tax structures. The right tax software, such as Vertex, can handle all that complexity on your behalf, and ensure you’re in compliance with all sale tax laws, regardless of where your end customer resides.
If you have questions about tax let SD know!