How Sales Tax Works for Clothing and Apparel - Will's Whiteboard. Get more sales tax compliance tips here: http://www.avalara.com/learn/
Sales tax can be tough for any type of business, but it's especially tough for retailers of clothing and apparel. Trying to keep track of sales tax laws, as they apply to clothing from state to state, gets crazy. I'll show you what I mean.
OK. Let's take a look at how this works from the point of view of three states: Texas, Pennsylvania and New York. In Texas, general articles of clothing, like this shirt, are taxed for the most part. So likely you would pay sales tax on this, if you bought it in Texas.
On the other hand, in Pennsylvania, general articles of clothing are exempt from sales tax. So the same shirt, likely not taxable in Pennsylvania.
What about New York? Well, it turns out that New York operates on this "threshold tax system", so under $110, sales on articles of clothing are generally tax-exempt from the state sales tax. But if you made a purchase that was over $110, like maybe this jacket, it would be subject to the state sales tax.
Now let me back up a little bit, because in Texas there's a sales tax holiday, so once a year, certain articles of clothing are exempt. You've got to keep that straight, too.
So far so good? Because there's more. When I said that articles of clothing were generally tax-exempt in Pennsylvania, what I didn't mention is that certain articles of clothing are not tax-exempt. For example, formal wear like this bow tie is not tax-exempt, and formal wear like this top hat here, is not tax-exempt either. So you would pay tax on these, likely, in Pennsylvania.
As you can see, even with three states alone, the laws on clothing and sales tax get very hard to track. My advice to you is to pay careful attention to those laws in states where you have to collect sales tax, and if you get stuck, consult an expert. You don't want to miss something critical and get embarrassed.
Tags: How Sales Tax Works for Clothing and Apparel - Will's Whiteboard, Clothing (Industry), apparel, sales tax, New York (US State), New York City (City/Town/Village), texas, pennsylvania