Sales Tax Holiday Details for Retailers
Legislation enacted by the 2015 General Assembly combines Virginia’s three sales tax holidays into one, three-day holiday beginning the first Friday in August at 12:01 a.m. and ending the following Sunday at 11:59 p.m. This year’s sales tax holiday is August 5-7, 2016.
All retailers must participate in the sales tax holiday on the sale of qualifying items. If a dealer fails to allow the exemption, the dealer is in violation of the law. Any dealer collecting the sales or use tax on nontaxable transactions must remit any erroneously or illegally collected tax to the Department of Taxation unless he can show that the tax has been refunded to the purchaser or credited to the purchaser's account.
Detailed lists of exempt items:
- School Supplies, Clothing, and Footwear
- Hurricane and Emergency Preparedness Items
- Energy Star™ and WaterSense™ Items
The sales tax holiday exemption applies to the sale of both new and used items if the item in question meets the exemption requirements.
During the sales tax holiday period, any retailer may choose to offer any non-exempt items “tax-free” by absorbing, or paying all or part of the sales tax, on behalf of the consumer. As a general rule, Virginia law does not allow this practice. However, during the sales tax holiday period, dealers may choose, but are NOT required, to absorb the tax on any items that do not qualify for the exemption. During the sales tax holiday and the 14 days immediately preceding the start of the sales tax holiday, dealers may advertise that they plan to absorb the tax on any or all non-qualifying items. Retail dealers who choose to absorb the tax on non-qualifying items must be able to demonstrate that the proper amount of tax has been accrued and remitted.
Retail dealers are not required to obtain an exemption certificate or other certification from purchasers of qualified products during the sales tax holiday period. Exempt sales of qualifying items sold during the sales tax holiday period should be recorded on Forms ST-9 and ST-8. Retail dealers who elect to absorb the tax on non-qualifying items must be able to demonstrate that the proper amount of tax has been accrued and remitted.
During the sales tax holiday, when the sales price of an item is greater than the maximum allowable sales price for an exempt item, sales or use tax is due on the entire charge for the item.
Qualifying items purchased online, by mail, or by telephone are exempt 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 seller accepts the order during the exemption period for immediate shipment, even if delivery is made after the exemption period.
During the sales tax holiday period, shipping and handling charges will not be included in the base price of an item that qualifies for the exemption. Provided the item meets the required threshold amount, that item will qualify for the sales tax holiday, and the associated shipping and handling charges will also be exempt from taxation. If the cost of an item exceeds the threshold requirements or the item is otherwise ineligible for exemption during the sales tax holiday, the shipping and handling charges will be included in the base price of the item, and the entire price will be subject to sales tax. This policy will be in effect only for the sales tax holiday period. The general policy of adding the cost of handling or the combined shipping and handling cost to the base price of an item will remain in effect for the rest of the year.
A sale of a qualifying item under a layaway plan qualifies for exemption if the customer places the qualifying merchandise on layaway during the holiday period, even if delivery and/or final payment occurs after the holiday period. Subsequent payments are also exempt from sales tax. Items placed on layaway prior to the sales tax holiday will only be eligible for the exemption if the final payment is made and the property is given to the purchaser during the exemption period.
Rain checks are eligible for the exemption if the item is purchased during the sales tax holiday period, regardless of when the item is actually delivered. If the rain check item is purchased prior to or after the sales tax holiday period, the exemption will not apply, even if the item is delivered during the sales tax holiday period.
If a customer purchases a qualified item during the tax exemption period and later exchanges it for a similar eligible item (even if a different size, different color, or other feature), no additional tax is due, even if the exchange is made after the exemption period. If a customer purchases a qualified item during the exemption period and returns the item after that period for credit on the purchase of a different item, the appropriate sales tax is due on the sale of the newly purchased item even if it would have been eligible for the exemption during the sales tax holiday period. If a customer purchases a qualified item before the exemption period and returns it during the exemption period for credit on the purchase of a different eligible item, no sales tax is due on the sale of the new item if it’s purchased during the sales tax holiday period.
Consumers may not use a rebate to reduce the price of an item so that it qualifies for the sales tax holiday exemption. A rebate occurs after a sale and does not constitute a reduction in sales price.
If a dealer offers a discounted price for an item, a retailer's coupon or a manufacturer’s coupon during the sales tax holiday, the reduced sales price is used to determine whether the item is eligible for the sales tax exemption.
Where items are sold under a "buy one, get one free” or “buy one, get one for a reduced price" special, a retailer cannot average the total price of both items to qualify for the exemption.
Items that are generally sold as a unit, such as a pair of shoes, must continue to be sold as a unit and cannot be priced separately and sold as individual items to obtain an exemption. If items are offered as sets, containing both exempt and taxable items, the items are subject to tax during the sales tax holiday.
If a vendor places a special order for a customer that must be custom-made or manufactured for future delivery after the holiday, the merchandise will not be considered as available for immediate delivery, and the transaction will not be eligible for the sales tax holiday exemption.
Rental items are not eligible for the tax exemption, regardless of whether the items are rented out and paid for during the sales tax holiday period.
Retailers must make a good faith effort to ensure that Energy Star™ and WaterSense™ products are purchased for noncommercial home or personal use. If an individual purchases a large number of appliances or uses a business or company credit card, debit card, or check, the retailer should charge sales tax on the item or items.