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The Ultimate Cheat Sheet for Ohio’s Sales Tax Holiday

Posted by Zinner & Co. Tax Department on Jul 27, 2017 5:06:21 PM

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For many parents, the idea of getting their kids ready for back-to-school conjures up both a welcome relief and a financial frenzy. According to NEAToday.org, in 2016, parents spent $200, on average, per elementary student and $330 and $375 per middle and high school student, respectively. That is a lot of paper and pencils!  

Fortunately, the state of Ohio has, for the third year, renewed legislation to declare a sales tax holiday intended to help ease the financial burden for students and their parents.  A side-benefit to this is that the sales tax holiday applies to anyone purchasing qualified items, whether they are in school, or not.

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The Ohio sales tax holiday starts on August 4 at 12:00 a.m., and continues until 11:59 p.m. on August 6. The sales taxes affected by the holiday includes state, county, and transit authority permissive taxes.

In past years, the sales tax holiday has been very beneficial for Ohio consumers. According to the Economics Center, Ohio consumers saved $3.3 million during the 2016 sales tax holiday.

What is today’s math lesson and how could you save? Presume one is purchasing back-to-school items for four children totaling $500. If those items are purchased in Cuyahoga County, where the sales tax rate is 8%, the savings amount to $40.  What a great gift from the state of Ohio!

What purchases qualify for the holiday?  Clothing, school supplies, and school instructional materials are the primary goods exempt from sales tax.  While there is a limit to the value of any single item, there is no limit to the number of items that may be purchased.   There are some restrictions, however, and items purchased for use in a trade or business are not exempt under the sales tax holiday. Let’s take a closer look:

Clothing

An item of clothing is exempt if priced at $75 or less. Generally, clothing includes, but is not limited to, shirts, pants, shorts, uniforms (both athletic and nonathletic), shoes, coats, and jackets. In addition, diapers, formal wear, and wedding apparel are covered by the tax holiday. However, protective equipment, sewing equipment, sports or recreational equipment, belt buckles (sold separately), costume masks (sold separately), and patches or emblems (sold separately) are specifically excluded from the sales tax holiday. If an item of clothing sells for more than $75, sales tax will be charged on the full purchase price.

School Supplies

Items priced below $20 per item are exempt. The state of Ohio is quite particular as to which items qualify as school supplies, meaning, for example, that one cannot expect to purchase a laptop without paying sales tax. Typically, binders, book bags, calculators, glue, index cards, lunch boxes and more qualify as school supplies.  Click here to see the complete list of included school supply items.

School Instructional Material

Items priced below $20 are exempt. The state of Ohio is exceptionally specific when defining instructional materials and generally includes reference books, reference maps and globes, textbooks, and workbooks.  Items not listed remain taxable.

What to do if an item is priced above $20?

First, coupons and discounts that bring the item down to the maximum eligible price will qualify that item for the tax exemption. However, this does not include third-party reimbursement, such as a manufacturer’s coupon.

Let me explain:
A coupon provided by a store is essentially just a discount by the store, but requires an individual to obtain a paper or digital coupon and redeem the coupon at that particular store or a chain (think Kohl’s Cash) for the discount.

A manufacturer’s coupon is not tied to a specific store or chain (think coupon specifically for a product, Tide detergent, for example). When the coupon is redeemed in the store, the store is mails that coupon back to the manufacturer and is reimbursed the amount of the discount provided one the coupon.

Second, mail, telephone, E-mail, and internet orders qualify if the consumer orders and pays for the item and the retailer accepts the order during the exemption period. If an order is placed prior to the holiday yet the goods are received during the sales tax holiday, those items will not qualify for the sales tax exemption, as the sale occurred before the holiday. Also, keep in mind, the sales tax holiday time is based on the retailer location, meaning, if one is ordering from a west coast retailer, but purchased at midnight in Ohio on August 4 (the starting time of the sales tax holiday), the item would not qualify.

Finally, If all items in a shipment qualify as eligible items and the sales price for each is within the sales tax holiday price threshold, the shipping and handling charges are not taxable.

If the shipment includes exempt items and taxable items (including an eligible item with a sales price in excess of $20 (school supplies)/$75 (clothing)), the seller should allocate the shipping and handling charges by a percentage based on the total price of the taxable items to the total price of all the items in the shipment.  The retailer must charge tax on the portion of the shipping and handling charges allocated to the taxable items in the shipment.

As you can see, if you take a little time and effort to plan your back-to-school purchases, you can pocket some pretty significant savings.

If you have questions about Ohio’s sales tax holiday, or are a business owner seeking guidance on corporate taxation, contact us at 216.831.0733 or info@zinnerco.com. We are happy to help and ready to start the conversation.

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Topics: Ohio business owners, Taxes - Individual

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