The ABCs of the Sales Tax Holiday

The State of Tennessee’s Annual Sales Tax Holiday is held every year on the first Friday in August and ends the following Sunday night. This year’s tax-free holiday weekend begins at 12:01 a.m. on Friday, Aug. 5, and ends Sunday, Aug. 7 at 11:59 p.m.

Here are some questions and answers about the Sales Tax Holiday:

What is a Sales Tax Holiday?

During the Sales Tax Holiday, Tennesseans can enjoy tax-free purchases on certain clothing, school and art supplies and computers.

What is Tax-Free?

Tax-free items include clothing with a price of $100 or less per item, school and school art supplies with a price of $100 or less per item and computers with a price of $1,500 or less. These items are exempt from state and local sales tax in Tennessee during the holiday. Local governments are held harmless and are reimbursed lost sales tax revenues by the state.

Additionally, there is no requirement that purchases be made only for students. If an item is tax exempt, anyone may make the purchase tax free.

In the clothing category, exempt clothing is defined as human wearing apparel for general use. It does not include accessories such as jewelry or bags or sports and recreational equipment like baseball gloves.

In school supplies category, school supplies are defined as items used by a student in a course of study. Specifically excluded are items such as instructional material, including reference books and school computer supplies such as compact discs, printers and printer ink.

In the computer category, a computer is defined as a central processing unit (CPU), along with various other components including monitor, keyboard, mouse, cables to connect components, and preloaded software. While the CPU may be purchased separately, other items must be part of a bundled computer package in order to be eligible. Software beyond what is preloaded with the computer package is not exempt from tax.

The following items are not exempt from tax:

• Computer parts, such as monitors, keyboards, speakers, and scanners when not sold in conjunction with a CPU

• Individually purchased software or other software not part of a preloaded software package on the initial purchase of a computer

• Storage media, such compact disks and USB flash drives

• Handheld electronic schedulers

• Personal digital assistants (PDAs) and electronic readers (i.e., Kindle, Nook, etc.)

• Video game consoles

• Computer printers and supplies for printers, such as paper and ink

Can I order by mail, telephone, e-mail or Internet?

The holiday also includes purchases of qualified items sold via mail, telephone, e-mail or Internet if the customer orders and pays for the item and the retailer accepts the order during the holiday for immediate shipment, even if delivery is made after the period.

What if the item is backlogged or on backorder?

If a customer wishes to order a certain tax-free item during the holiday and it is not in stock, the item remains tax-free upon delivery. In other words, backlogs and backorders outside the buyer’s control will not affect the exempt status of tax-free items. Intentionally delayed sales are taxable.

What if I want to place an item on layaway or pay for an item that is currently on layaway?

Qualified items previously placed on layaway are exempt when the final payment is made during the holiday. Items are also exempt if placed on layaway during the holiday and the final payment is made after the exemption period.

For more information, contact the Tennessee Department of Revenue at www.tntaxholiday.com.

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