Tax Holiday Guidance Issued by Massachusetts Department of Revenue

The Massachusetts legislature has authorized a Sales Tax holiday for the weekend of August 10-11, 2013 for items costing less than $2,500.  The Massachusetts Department of Revenue (MDOR) recently issued guidance to consumers and retailers, some of the highlights are as follows:

• Sales tax will continue to apply to the full price of any item costing over $2,500.  Using a $3,000 piece of furniture as an example, the tax will be assessed on the full $3,000 rather than the $500 excess.
• Under existing law, clothing is subject to a $175 tax exemption. During the tax holiday, the Mass DOR guidance states that clothing items in excess of the $2,500 threshold will be taxed on the total purchase price less this $175 exemption.  For example, a $2,550 wedding dress will be subject to tax on $2,375, net of the exemption.
• The holiday does not apply to sales of motor vehicles, motorboats, meals, tobacco, and various utility services.
• Items costing less than $2,500 individually may be combined on a single invoice to take advantage of the tax holiday.  Conversely, a package of items bundled and sold as a single item will be taxable in full if the price exceeds the $2,500 threshold.
• Retailers are not allowed to accept deposits for items in advance of August 10 with the intent of putting the entire sale through on the 10th or 11th.