The state of Iowa’s annual tax free weekend, slated for August 3rd and 4th, arrives at the peak of the back to school shopping season. For two days only, the first Friday and Saturday of August, shoppers in Iowa are exempt from paying sales tax on select items priced under $100. All stores open during this time are required to participate.
The sales tax exemption is restricted primarily to items of clothing and footwear, as defined by the Iowa Department of Revenue. So what are items eligible for the exemption?
The Iowa Department of Revenue defines clothing as “any article of wearing apparel and typical footwear intended to be worn on or about the human body.”
It also defines items that are not considered to be clothing. This list includes “watches, watchbands, jewelry, umbrellas, handkerchiefs, sporting equipment, skis, swim fins, roller blades, skates, and any special clothing or footwear designed primarily for athletic activity or protective use and not usually considered appropriate for everyday wear.”
Regardless the item of clothing or footwear, any priced above $100 will be taxed during the tax-free weekend. Items normally sold as units cannot be separated in an effort to obtain the exemption. For example, a pair of shoes priced at $120 cannot be split and sold as individual shoes for $60 each.
BOGO is a No-Go
The total price of items 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.
Exchanges and Returns
When a customer purchases an eligible item during the exemption period, then later exchanges the item for the same item (different size, different color, etc.), no additional tax is due even if the exchange is made after the exemption period.
When a customer purchases an eligible item during the exemption period, then later returns the item and receives credit on the purchase of a different item, the appropriate sales tax applies to the full sales price of the newly-purchased item.
When a customer returns an eligible item purchased during the exemption period, the retailer should refund tax only if the customer has sufficient documentation to show that tax was paid on the item.
Coupons, Rebates, and Rain Checks
Manufacturer’s coupons do not reduce the sales price of an item. Therefore, a manufacturer’s coupon cannot be used to reduce the selling price of an item to less than $100.00 in order to qualify for the exemption.
Store coupons and discounts reduce the sales price of an item. Therefore, a store coupon or discount can be used to reduce the sales price of an item to less than $100.00 in order to qualify for the exemption.
Rebates occur after the sale and do not affect the sales price of an item purchased. Eligible items sold and delivered during the exemption period using a rain check 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 sold and delivered after the exemption period.
Sales Tax Holiday
The following items (priced at under $100 each) are exempt from sales tax at retail stores in Iowa on August 4 and 5, 2017. For a complete list of taxable and exempt items of clothing and shoes, logon to https://tax.iowa.gov/iowas-annual-sales-tax-holiday:
adult diapers; aerobic clothing; antique clothing; aprons, household; athletic socks; baby bibs, clothes, diapers, receiving blankets; bandanas; bathing suits, caps, cover-ups; belts with buckles attached; bibs; blouses; boots, general purpose; bowling shirts; bow ties; bras; bridal apparel, sold not rented; camp clothing; caps and hats, including sports; chef’s uniforms, children’s novelty costumes; choir and altar clothing; clerical vestments; coats and wraps; corsets and corset laces; costumes, sold not rented; coveralls; cowboy boots; diapers, diaper inserts (adult and baby, cloth or disposable); dresses; dress gloves, shoes; ear muffs; formal clothing, sold not rented; fur coats and stoles; galoshes; garters and garter belts; girdles, bras, and corsets; gloves (generally), such as dress, garden, leather and work; golf clothing, caps, dresses, shirts, skirts, pants; graduation caps and gowns, sold not rented; gym suits and uniforms; hats; hiking boots; hooded shirts and sweatshirts; hosiery, including support hosiery; jackets; jeans; jerseys for other than athletic wear; jogging apparel, bras; knitted caps, hats; lab coats; leather clothing; leg warmers; leotards and tights; lingerie; men’s formal wear, sold not rented; neckwear, including ties and scarves; nightgowns and night shirts; overshoes and rubber shoes; pajamas; pants; panty hose; ponchos; prom dresses; raincoats, rainhats, and ponchos; receiving blankets for babies; religious clothing; riding pants; robes; rubber thongs, flip-flops; running shoes without cleats; sandals; scarves; scout uniforms; shawls and wraps; shirts; shoe inserts and laces; shoes without cleats; shoulder pads for dresses, jackets, etc.; shorts; skirts; slacks; sleepwear, nightgowns, pajamas; slippers; slips; sneakers; socks; stockings; support hose; suspenders; sweatshirts; sweaters; swim suits, trunks; tennis skirts, dresses, shoes; tights; trousers; tuxedos, but not cufflinks and rentals; underclothes; underpants; undershirts; uniforms for work and school; veils; vests, general, to wear with suits; walking shoes; windbreakers; work clothes and uniforms.