The Massachusetts sales tax holiday allows you to purchase items up to $2,500 in Massachusetts for personal use, exempt from tax. This legislation became law in 2018, and an annual sales tax exemption was established for one weekend each year.
For 2022, the tax-free sales weekend has been set between August 12 and 13. This weekend, the vast majority of retail purchases are not subject to state sales tax.
Requirements for sales tax exemption
It is important to look at some considerations regarding the sales tax exemption:
To whom does this exemption apply?
The sales tax exemption applies to individuals who purchase retail items for personal use only. Purchases made by corporations or businesses and purchases made by individuals for business use are still subject to the tax.
Do all items have the sales tax exemption?
No. Note that not all items will apply for the sales tax exemption. Among the items for which the exemption does not apply will be:
- Food
- Vehicles
- Motorboats
- Telecommunication services
- Gas
- Steam
- Electricity
- Tobacco products
- Marijuana or products made with marijuana
- Alcoholic beverages
- Any item priced more than $2,500
It is also important to note that meals do not qualify for sales tax exemption.
Do internet sales qualify for the exemption?
Yes. The item will qualify for the sales tax exemption if an eligible product is ordered over the Internet during the sales tax holiday. No sales tax will be due on this purchase. It applies even if delivery of the item is made after the end of the sales tax holiday weekend.
However, note that sales made in installments will not be eligible for the sales tax exemption.
Do rental goods apply for the tax exemption?
Even though the rented items are not eligible, vehicles or boats may benefit from the tax exemption. It will apply for rentals for up to 30 days, but you must pay the full rental amount during the holiday weekend for the exemption to apply.
Is it mandatory for all retailers to participate in the sales tax exemption weekend?
Yes. All businesses that make sales assumed to be taxable in the Commonwealth of Massachusetts or to merchants that are open on the holiday dates will be required to participate on this day. Internet vendors will also join in.
What is the exemption limit?
Any item that exceeds $2,500 will have no exemption, while all eligible items with a lower value will be exempt. If the item exceeds $2,500, sales tax will be applied on the full value, not on the amount over the threshold.
However, there is an exemption on clothing since an article of clothing is exempt from tax unless it costs more than $175. If it exceeds this threshold, only the amount over $175 will be subject to tax.
If the items you are purchasing do not exceed the thresholds, they will always be tax-free. For those who purchase multiple items costing $2,500 or less, the exemption will apply to all items, even if all items together cost more than $2,500.
Can I cancel a previous purchase to make it on holiday and avoid paying tax?
No. If you have already made a purchase and paid for an eligible item before the tax-free weekend, you cannot cancel the previous purchase. Therefore, you will not be able to avoid paying taxes by following this technique.
Do I need to take home the item that I purchased?
No. The sales tax exemption will apply as long as the item is paid for in full during the sales tax holiday weekend. The item can be scheduled for delivery after the weekend without affecting the exemption.
What happens if the item is exchanged?
There is nothing to worry about it. Even if you make the tax change after the weekend, you will in no way be subject to tax retroactively. If taxes are charged in error, the company that made the purchase will be responsible for refunding the taxes paid.
It will be necessary to provide the company with the receipt or other proof of purchase to determine the amount of the refund. In the event that the retailer accidentally collects the tax, it will have to be referred to the DOR by filing an amended return to recover the amounts that have been refunded to the customers.
How can a retailer report exempt sales on the August return?
It should be noted that, on the August sales and use tax return, you should report the number of uncollected tax items. There you will apply all sold items during the sales tax holiday.
To fill in this data, you will need to look on the tax form for the “Exempt Sales” section. You will place the total amount for which the tax exemption was made to the customers, and you will not have any inconveniences.