Saturday and Sunday, August 7th and 8th, is the tax-fee weekend in Iowa for purchases of clothing and footwear. What that means is that there is no addition of sales tax, state or local, on purchases of certain cloths or shoes, boots, sandals, etc. As with just about everything, there are exceptions.
If one item of clothing or footwear exceeds one-hundred dollars, the entire item is taxed at the usual rate.
Clothing does not include: “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.” Question. Does that now include face masks in the exemption? Hmmm. Although face masks are designed for protective use, it is now considered appropriate for everyday wear.
What is “athletic activity?” Is Yoga considered to be an athletic activity? “In the West, yoga is less understood for its spiritual component and more commonly known as a physical workout of specific poses, or asanas.” Merriam-Webster defines “athletics” as 1: “exercises, sports, or games engaged in by athletes. 2: the practice or principles of athletic activities. Using these definitions, are yoga pants excluded in the tax-free sales? The administrative rule on this section of the Iowa Code specifies that “jogging suits” would be included in tax-exempt clothing, but what about jogging shorts, sweat pants, and sports bras? Why would a sports bra be taxable but not a regular bra? Does this tax-free exercise include purchases at Victoria’s Secret? Furthermore, who in government is going to determine that a person is wearing a swim suit (tax-exempt) for everyday use and not used by a member of the swim team(taxable)?
As you can tell, I have never liked this law. At the time it was first enacted, I saw many parents running out to buy school clothing and shoes. One month later, JC Penney had a weekend sale with ten percent off. You can do the math. The sales tax was 5 percent at the time. Today, it is seven percent in most areas of Iowa.
No longer do I pay much attention to clothing sales, but perhaps Penney’s and several other stores have finally offered their sales on the tax holiday weekend.
Items sold as a unit must remain a unit. “A suit is normally priced at $125.00 on a single price tag. The suit cannot be split into separate articles so that any of the items may be sold for under $100.00 in order to qualify for the exemption.” First of all, I don’t necessarily want to see a suit that sells for $125. Here’s the loophole: Buy a sports coat and a few pairs of pants. But once again, can you even buy a decent sports jacket for less than $100?
If the store doesn’t have what you want during this holiday, and you request a rain check, the item is taxed when you pick it up after the holiday is over. That doesn’t seem fair, does it?
Layaway – This is a strange exception. If you place an item on layaway on the first day of the sales tax holiday, and the item is priced under $100, you will not have to pay a sales tax on any portion of the costs of the item if you pick it up on day two of the holiday, but if you pick it up on any other day after the holiday, you must pay sales tax on the entire price of the item. Who places something on layaway for one day?
There are quite a few other exemptions in Iowa. You can find the entire list here. It also spells out what to do about tailoring, rentals, refunds, etc.
Fifteen other states also have this silly promotional ‘holiday’. You’ll have to check out your state’s Department of Revenue website to discover what is acceptable or not in Alabama, Arkansas, Connecticut, Florida, Maryland, Massachusetts, Mississippi, Missouri, New Mexico, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. Some of these states have more than one weekend. A few states include school supplies such as pencils and paper tablets, and a couple include backpacks and computers.
Iowa’s silly holiday began in 2000. The law’s intent was twofold. It was supposed to give an incentive to businesses and promote economic growth locally and throughout the state. Also, it was sold as an “effective tool for providing relief to low-income individuals.” Neither goal was obtained, yet Iowa and other states hang on to these scams. The District of Columbia and a few states have suspended or entirely dropped the schemes since they began in 1980. “Ohio and Michigan enacted the first sales tax holidays in 1980 when they offered one-time tax holidays for automobile purchases. But it was New York that sparked the modern trend, with the first sales tax holiday for clothing in 1997. New York’s objective was to tackle cross-border shopping, the phenomenon of residents traveling to nearby states to take advantage of lower sales tax rates (particularly clothing purchases in New Jersey).” The Tax Foundation.
The Tax Foundation cites a 2017 Federal Reserve study that claims some retailers raise prices during the tax-exempt holidays, and that there is no significant increases in consumer spending during these holidays. Although sales taxes are regressive, and low-income people may reap a benefit, the tax-exempt holiday also applies to those with large financial resources. In effect, it once again gives those that got – more.
You can check out the links above and here to see what is available for a tax-free shopping weekend. Or, you can go to a neighboring state, such as Minnesota, where clothing and footwear is non-taxable all year long. Either that, or wait for quarterly sales, either in-store or online.