State Sales Tax Holiday Approved For Next Weekend
By: Michael C. Bailey
The sales tax holiday for 2012 is a go.
The Legislature approved the measure Tuesday as part of an economic development bill, and it is now set for next weekend, August 11 and 12.
During the sales tax holiday, the 6.25 percent sales tax will be lifted from almost all retail purchases under $2,500 of “tangible personal property bought for personal use only,” according to the Massachusetts Department of Revenue (DOR).
The exemption also applies to the state’s “use tax,” which is applied to any items purchased from an out-of-state retailer for use in Massachusetts, assuming that those items are normally taxable in Massachusetts, and that sales tax is not collected on the item by the state from which it was purchased. This applies to items ordered online, assuming the payment is made during the holiday.
Retail purchases made by businesses, or by individuals for business use, remain taxable.
Single items with a retail price of $2,500 or more are taxed normally, for the full amount; the tax is not calculated on the difference between the $2,500 threshold and the item’s retail price. Example: a $3,000 item is taxed at $3,000, not $500.
Items sold as a bundle, such as a computer that includes a monitor and peripherals, is considered a single item.
Components sold individually are treated as multiple items and are declared exempt or taxable according to each item’s unit price.
Sales tax on eligible clothing items will be adjusted. Normally in Massachusetts, a single article of clothing is taxed only if its value exceeds $175. During the holiday, a single item of clothing will not be taxed until it hits the $2,500 threshold, and the tax will be calculated based on the item’s retail value less $175—the normal tax threshold for clothes.
For example, a suit worth $600, which would normally be taxed, is not during the holiday. A wedding dress worth $3,000 is taxed as an item worth $2,825 ($3,000 minus $175).
Motor vehicles, motorboats, and tobacco products will be taxed normally. Meals and telecommunications services are not “tangible personal property” and therefore are taxed normally.
Alcohol, which became subject to the sales tax in 2009, will be tax-exempt during the holiday.
Valid coupons and advertised discounts must be honored during the sales tax holiday.
Any item purchased during the holiday but later exchanged for an item of the same price, even after the holiday ends, will not be taxed. If the new item is worth more, tax may be collected on the difference.
Special-order items are exempt from sales tax if the order is placed and paid for in full during the holiday, even if the item is delivered after the holiday ends. Layaway items are not tax exempt, even if the final payment is made during the holiday.
Items purchased with a rain check issued during the sales tax holiday will be tax exempt, regardless of when the item is actually purchased.
Items with a rebate are taxed according to their full sale price at the time of the holiday.
All retail businesses must participate in the holiday. Should a consumer be erroneously charged sales tax during the holiday, he is entitled to seek a refund from the retailer for the tax charged.
According to information provided by the DOR, consumers have saved more than $114 million in sales tax since 2004, when Massachusetts held its first tax holiday. The Legislature has reauthorized the holiday every year since, except for 2009—the same year lawmakers hiked the sales tax from five percent to its current 6.25 percent rate.