34 Tex. Admin. Code § 3.365 - Sales Tax Holiday-Clothing, Shoes and School Supplies
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Clothing or footwear--An article of apparel that the article manufacturer
designs for wear on or about the human body. Except as provided under paragraph
(3) of this subsection, for the purposes of this section, the term does not
include accessories, such as jewelry, handbags, purses, briefcases, luggage,
wallets, watches, and similar items that are carried on or about the human
body, without regard to whether the item is worn on the body in a manner that
is characteristic of clothing.
(2)
Eligible item--For the purposes of this section, an article of clothing or
footwear, a school backpack, or school supplies that are eligible for the sales
tax exemption established under Tax Code, §
151.326 and §
151.327.
(3) School backpack--A pack with straps that
one wears on the back, including a backpack with wheels (provided it may also
be worn on the back like a traditional backpack) or a messenger bag, that is
purchased for use by a student in a public or private elementary or secondary
school. The term does not include an item that is commonly considered luggage,
a briefcase, an athletic bag, a duffle bag, a gym bag, a computer bag, or a
framed backpack.
(4) School
supply--The term "school supply" has the meaning assigned by the Streamlined
Sales and Use Tax Agreement adopted November 12, 2002, including all amendments
made to the Agreement on or before December 14, 2006. The items set out in the
following all-inclusive list are school supplies for the purpose of this
exemption: binders, book bags, calculators, cellophane tape, blackboard chalk,
compasses, composition books, crayons, erasers, expandable folders, pocket
folders, plastic folders, manila folders, glue, paste, paste sticks,
highlighters, index cards, index card boxes, legal pads, lunch boxes, markers,
notebooks, loose leaf ruled notebook paper, copy paper, graph paper, tracing
paper, manila paper, colored paper, poster board, construction paper, pencil
boxes and other school supply boxes, pencil sharpeners, pencils, pens,
protractors, rulers, scissors, and writing tablets. School supply items not on
this list, for example, computers and textbooks, are not eligible for the
exemption.
(b) Exempt
sales.
(1) Sales or use tax is not due on the
sale of an eligible item if:
(A) the sales
price of the eligible item is less than $100; and
(B) the sale takes place during the period
that begins at 12:01 a.m. on the Friday before the fifteenth day preceding the
fourth Monday in August, and ends at 12:00 a.m. (midnight) on the following
Sunday.
(i) Using 2013 as an example, the
fourth Monday in August falls on August 26. The fifteenth day preceding August
26 is Sunday, August 11th. The Friday before August 11 is August 9. The sales
tax holiday will begin at 12:01 a.m. on Friday, August 9 and end at 12:00 a.m.
(midnight) on Sunday, August 11.
(ii) In 2014, the sales tax holiday will
begin at 12:01 a.m. on Friday, August 8 and end at 12:00 a.m. (midnight) on
Sunday, August 10.
(iii) In 2015,
the sales tax holiday will begin at 12:01 a.m. on Friday, August 7 and end at
12:00 a.m. (midnight) on Sunday, August 9.
(2) The exemption applies to each eligible
item that sells for less than $100, regardless of how many items are sold on
the same invoice to a customer. For example, if a customer purchases two shirts
for $80 each, then both items qualify for the exemption, even though the
customer's total purchase price ($160) exceeds $99.99.
(3) The exemption does not apply to the first
$99.99 of an otherwise eligible item that sells for more than $99.99. For
example, if a customer purchases a pair of pants that costs $110, then sales
tax is due on the entire $110.
(c) Taxable sales. The exemption under this
section does not apply to:
(1) any special
clothing or footwear that the manufacturer primarily designed for athletic
activity or protective use and that is not normally worn except when used for
the athletic activity or protective use for which the manufacturer designed the
article. For example, golf cleats and football pads are primarily designed for
athletic activity or protective use and are not normally worn except when used
for those purposes; therefore, they do not qualify for the exemption. However,
tennis shoes, jogging suits, and swimsuits are commonly worn for purposes other
than athletic activity and thus qualify for the exemption;
(2) accessories, such as jewelry, handbags,
purses, briefcases, luggage, athletic bags, duffle bags, gym bags, computer
bags, framed backpacks, umbrellas, wallets, watches, and similar items that are
carried on or about the human body, without regard to whether the item is worn
on the body in a manner that is characteristic of clothing;
(3) school supplies and backpacks that are
not purchased for use by elementary or secondary school students;
(4) school supplies not listed in subsection
(a)(4) of this section;
(5) the
rental of clothing or footwear. For example, the exemption under this section
does not apply to the rental of formal wear, costumes, uniforms, diapers, or
bowling shoes;
(6) taxable services
that are performed on clothing or footwear, such as repair, remodeling,
alterations, or maintenance services, and cleaning or laundry services. For
example, a customer purchases a pair of pants for $90 and pays $15 to have the
pants cuffed, then the $90 charge for the pants is exempt, but tax is due on
the $15 alterations charge; and
(7)
purchases of items that are used to make or repair eligible items, including
fabric, thread, yarn, buttons, snaps, hooks, and zippers.
(d) Articles normally sold as a unit.
Articles that are normally sold as a unit must continue to be sold in that
manner; they cannot be priced separately and sold as individual items in order
to obtain the exemption. For example, if a pair of shoes sells for $150, then
the pair cannot be split in order to sell each shoe for $75 to qualify for the
exemption. If a suit is normally priced at $225 on a single price tag, the suit
cannot be split into separate articles so that any of the components may be
sold for less than $100 in order to qualify for the exemption. However,
components that are normally priced as separate articles may continue to be
sold as separate articles and qualify for the exemption if the price of an
article is less than $100.
(e)
Sales of pre-packaged combinations containing both exempt and taxable items.
(1) When an eligible item is sold together
with taxable merchandise in a pre-packaged combination or single unit and the
predominant cost of the set or unit is taxable, then the full price is subject
to sales tax unless the price of the eligible item is separately stated. For
example, if a boxed gift set that consists of a French-cuff dress shirt,
cufflinks, and a tie tack is sold for a single price of $95, the full price of
the boxed gift set is taxable if the cufflinks and tie tack are the predominant
cost and the price of the shirt and tie are not separately stated.
(2) When an eligible item is sold in a
pre-packaged combination that also contains taxable merchandise as a free gift
and no additional charge is made for the gift, the eligible item may qualify
for the exemption under this section. For example, a boxed set may contain a
tie and a free tie tack. If the price of the set is the same as the price of
the tie sold separately, the item that is being sold is the tie, which is
exempt from tax if the tie is sold for less than $100 during the exemption
period. Note: When a retailer gives an item away free of charge, the retailer
owes sales or use tax on the purchase price that the retailer paid for the
item.
(f) Discounts and
coupons.
(1) A retailer may offer discounts
to reduce the sales price of an item. If the discount reduces the sales price
of an item to $99.99 or less, the item may qualify for the exemption under this
section. For example, a customer buys a $150 dress and a $100 blouse from a
retailer who offers a 10% discount. After application of the 10% discount, the
final sales price of the dress is $135, and the blouse is $90. The dress is
taxable (its price is over $99.99), and the blouse is exempt (its price is less
than $100.00).
(2) When retailers
accept coupons as a part of the sales price of any taxable item, the value of
the coupon is excludable from the tax as a cash discount, regardless of whether
the retailer is reimbursed for the amount that the coupon represents.
Therefore, a coupon can be used to reduce the sales price of an item to $99.99
or less in order to qualify for the exemption under this section. For example,
if a customer purchases a pair of shoes priced at $110 with a coupon worth $20,
the final sales price of the shoes is $90, and the shoes qualify for the
exemption.
(g) Buy one,
get one free or for a reduced price. The total price of items that are
advertised as "buy one, get one free," or "buy one, get one for a reduced
price," cannot be averaged in order for both items to qualify for the exemption
under this section. The following examples illustrate how such sales should be
handled.
(1) A retailer advertises pants as
"buy one, get one free." The first pair of pants is priced at $120; the second
pair of pants is free. Tax is due on $120. Having advertised that the second
pair is free, the store cannot register the charge for each pair of pants at
$60 in order for the items to qualify for the exemption. However, if the
retailer advertises and sells the pants for 50% off, and sells each pair of
$120 pants for $60, each pair of pants qualifies for the exemption. Note: When
a retailer gives an item away free of charge, the retailer owes sales or use
tax on the purchase price that the retailer paid for the item.
(2) A retailer advertises shoes as "buy one
pair at the regular price, get a second pair for half price." The first pair of
shoes is sold for $100; the second pair is sold for $50 (half price). Tax is
due on the $100 shoes, but not on the $50 shoes. Having advertised that the
second pair is half price, the store cannot ring up each pair of shoes for $75
in order for the items to qualify for the exemption under this section.
However, if the retailer advertises the shoes for 25% off, and thereby sells
each pair of $100 shoes for $75, then each pair of shoes qualifies for the
exemption.
(h) Rebates.
Rebates occur after the sale and do not affect the sales price of an item
purchased. For example, a customer purchases a sweater for $110 and receives a
$12 rebate from the manufacturer. The retailer must collect tax on the $110
sales price of the sweater.
(i)
Layaway sales. A layaway sale is a transaction in which merchandise is set
aside for future delivery to a customer who makes a deposit, agrees to pay the
balance of the purchase price over a period of time, and, at the end of the
payment period, receives the merchandise. An order is accepted for layaway by
the retailer when the retailer removes the goods from normal inventory or
clearly identifies the items as sold to the customer. The sale of an eligible
item under a layaway plan qualifies for exemption when either:
(1) final payment on a layaway order is made
by, and the merchandise is given to, the customer during the exemption period;
or
(2) the customer selects the
eligible item 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 exemption period.
(j) Rain checks. Eligible items that
customers purchase during the exemption period with use of a rain check will
qualify for the exemption regardless of when the rain check was issued.
However, issuance of a rain check during the exemption period will not qualify
an eligible item for the exemption if the item is actually purchased after the
exemption period.
(k) Exchanges.
(1) If a customer purchases an eligible item
during the exemption period, but later exchanges the item for an item of a
different size, different color, or other feature, no additional tax is due
even if the exchange is made after the exemption period.
(2) If a customer purchases an eligible item
during the exemption period, but after the exemption period has ended, the
customer returns the item and receives credit on the purchase of a different
item, the appropriate sales tax is due on the sale of the newly purchased
item.
(3) If a customer purchases
an eligible item before the exemption period, but during the exemption period
the customer returns the item and receives credit on the purchase of a
different eligible item, no sales tax is due on the sale of the new item if the
new item is purchased during the exemption period.
(4) Examples:
(A) A customer purchases a $35 shirt during
the exemption period. After the exemption period, the customer exchanges the
shirt for the same shirt in a different size. Tax is not due on the $35 price
of the shirt.
(B) A customer
purchases a $35 shirt during the exemption period. After the exemption period,
the customer exchanges the shirt for a $35 jacket. Because the jacket was not
purchased during the exemption period, tax is due on the $35 price of the
jacket.
(C) During the exemption
period, a customer purchases a $90 dress that qualifies for the exemption.
Later, during the exemption period, the customer exchanges the $90 dress for a
$150 dress. Tax is due on the $150 dress. The $90 credit from the returned item
cannot be used to reduce the sales price of the $150 item to $60 for exemption
purposes.
(D) During the exemption
period, a customer purchases a $60 dress that qualifies for the exemption.
Later, during the exemption period, the customer exchanges the $60 dress for a
$95 dress. Tax is not due on the $95 dress because it was also purchased during
the exemption period and otherwise meets the qualifications for the
exemption.
(l) Returned merchandise. For a 30-day period
after the temporary exemption period, when a customer returns an item that
would qualify for the exemption, no credit for or refund of sales tax shall be
given unless the customer provides a receipt or invoice that shows tax was
paid, or the retailer has sufficient documentation to show that tax was paid on
the specific item. This 30-day period is set solely for the purpose of
designating a time period during which the customer must provide documentation
that shows that sales tax was paid on returned merchandise. The 30-day period
is not intended to change a retailer's policy on the time period during which
the retailer will accept returns.
(m) Mail, telephone, e-mail, Internet orders,
and custom orders. Under the Texas sales tax law, a sale of tangible personal
property occurs when a purchaser receives title to or possession of the
property for consideration. Therefore, an eligible item may qualify for this
exemption if:
(1) the item is both delivered
to and paid for by the customer during the exemption period; or
(2) the customer orders and pays for the item
and the retailer accepts the order during the exemption period for immediate
shipment, even if delivery is made after the exemption period. The retailer
accepts an order when the retailer has taken action to fill the order for
immediate shipment. Actions to fill an order include placement of an "in date"
stamp on a mail order, or assignment of an "order number" to a telephone order.
An order is for immediate shipment when the customer does not request delayed
shipment. An order is for immediate shipment notwithstanding that the shipment
may be delayed because of a backlog of orders or because stock is currently
unavailable to, or on back order by, the company.
(n) Shipping and handling charges.
(1) Shipping and handling charges are
included as part of the sales price of an eligible item, regardless of whether
the charges are separately stated. Except as provided in paragraph (2) of this
subsection, if multiple items are shipped on a single invoice, the shipping and
handling charge must be proportionately allocated to each item ordered, and
separately identified on the invoice, to determine if any items qualify for the
exemption. The following examples illustrate the way these charges should be
handled.
(A) A customer orders a jacket for
$95. The shipping charge to deliver the jacket to the customer is $5.00. The
sales price of the jacket is $100. Tax is due on the full sales
price.
(B) A customer orders a suit
for $285 and a shirt for $95. The charge to deliver the items is $15. The $15
shipping charge must be proportionately and separately allocated between the
items: $285 / $380 = 75%; therefore, 75% of the $15 shipping charge, or $11.25,
must be allocated to the suit, and separately identified on the invoice as
such. The remaining 25% of the $15 shipping charge, or $3.75, must be allocated
to the shirt, and separately identified on the invoice as such. The sales price
of the shirt is $95 plus $3.75, which totals $98.75; therefore, the shirt
qualifies for the exemption.
(C) A
customer orders a suit for $285 and a shirt for $95. The charge to deliver the
items is $20. The $20 shipping charge must be proportionately and separately
allocated between the items: $285 / $380 = 75%; therefore, 75% of the $20
shipping charge, or $15, must be allocated to the suit, and separately
identified on the invoice as such. The remaining 25% of the $20 shipping
charge, or $5.00, must be allocated to the shirt, and separately identified on
the invoice as such. The sales price of the shirt is $95 plus $5.00, which
totals $100; because the sales price of the shirt exceeds $99.99, the purchase
of the shirt is taxable.
(2) If the shipping and handling charge is a
flat rate per package and the amount charged is the same regardless of how many
items are included in the package, for purposes of this exemption the total
charge may be attributed to one of the items in the package rather than
proportionately and separately allocated between the items. For example, a
customer orders five shirts, with four priced at $98 and one at $85. The
retailer charges $10 for shipping and handling the order. The retailer would
have charged the same amount for shipping and handling whether the customer
ordered one shirt or five shirts. The retailer may choose to attribute the $10
shipping and handling charge to the shirt that was sold for $85 rather than
allocate the charge proportionately and separately between the shirts. If the
charge is attributed to the $85 shirt, the sales price of that shirt is $95,
and all of the shirts will qualify for the exemption.
(o) Documenting exempt sales.
(1) Except as provided in paragraphs (2) and
(3) of this subsection, a retailer is not required to obtain an exemption
certificate on sales of eligible items during the exemption period; however,
the retailer's records should clearly identify the type of item sold, the date
on which the item was sold, and the sales price of the item.
(2) A retailer who sells more than 10
backpacks to a customer at the same time must obtain an exemption certificate
from the customer verifying that the backpacks are being purchased for use by
elementary or secondary school students.
(3) If the purchaser is buying the school
supplies under a business account, the retailer must obtain an exemption
certificate from the purchaser certifying that the items are purchased for use
by an elementary or secondary school student. "Under a business account" means
the purchaser is using a business credit card or business check rather than a
personal credit card or personal check; is being billed under a business
account maintained at the retailer; or is using a business membership at a
retailer that is membership based.
(p) Reporting exempt sales. No special
reporting procedures are necessary to report exempt sales made during the
exemption period. Sales should be reported as currently required by
law.
Notes
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