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Prepare Your Small Business to Maximize Impact of Tax Free Weekend
  • 17 July 2018
  • Tiffany C Wright

Prepare Your Small Business to Maximize Impact of Tax Free Weekend

Many states designate tax holidays at different points throughout the year. Oftentimes, they are put out there as a Tax Free Weekend late in the summer. For many states, it falls on the last weekend in July or the first weekend in August to help boost back-to-school shopping. Across the U.S., shoppers save money taking advantage of these sales tax holidays.

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Here are some of the things you need to know to determine if your business can capitalize on this weekend and, if so, how to do so.

Know what items are exempt from taxes.

According to the South Carolina Department of Revenue, items used in classrooms such as binders, paper, pens and other related items are all exempt. Items that are not as obvious but that are also part of classroom or school activities are also included – things such as uniforms, calculators, lunchboxes and musical instruments. You may also find that computer accessories such as keyboards and printers are exempt.

Because the tax free holiday aims to help students of all ages, from kindergarten to college, dorm items may also be exempt. This includes bedroom and bath linens, pillows and shower curtains. Clothing, footwear and accessories may also be exempt.

Keep in mind that there are often price limits on items. For example, computers under $750 may be exempt but higher priced ones are not. Refer to the Federation of Tax Administrators for a list of the states that use tax free holidays and the 2-3 day weekends that apply. You should also double-check your state's department of revenue website to make sure that the particular items that are exempt in each category as discussed above apply in your state. In addition, note any pricing limits so you can plan accordingly.

Ensure your sales tax calculations are properly set up.

You will need to modify your point of sale or accounting system to properly reflect the sales tax exemptions. Conduct a test run well in advance to confirm that your system is operating properly and not assigning sales tax to the exempt items while still assigning sales tax to the non-exempt items. It’s also a good idea to check with your bookkeeper or accountant to make them aware of the holiday you plan to participate in.

Prepare to stay open.

If you are normally closed on Saturday or Sunday or close relatively early, you might consider remaining open for longer hours. More people will likely be out shopping during the weekend, moving from place to place. Being open on those days and staying open longer allows you to capture more prospective customers.

Be sure to schedule your employees to help cover the extra days and hours needed. Talk with other local businesses that have participated in tax free holidays in the past. If foot traffic and increased sales volume is great enough, you may also want to add additional personnel at anticipated peak times to handle the influx. Update your extended hours posted for your store and promote the extended open dates and times on your website and in social media.

Put specific items on sale.

Be mindful of the monetary limits your state has in place for items that qualify for exemption. For example, Iowa and Florida place limits of $100 for the amount spent on a single item of clothing. If you have items you would like to include that are above these amounts, you will need to put them on sale to get them below the limit. You may also want to offer a broader sale to entice even more customers to visit your store.

Stock up for increased foot traffic.

States and the media generally do a good job publicizing the tax free weekend. Assuming you do the same regarding your business, be prepared for increased foot traffic. Stock up on those items that are exempt because sales of those items will likely spike during this weekend.

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Having sufficient items in stock and offering a great deal can attract new or returning customers to your location and ensure customer satisfaction. Be mindful of your margins so that as your sales increase, you’re not sacrificing profits.

States offer tax free holidays to stimulate the retail sector after a long summer of typically lower retail sales. A tax free weekend can be a great way to capture new customers, especially those who may have previously overlooked your business. Fully utilize this opportunity by planning, communicating and providing excellent customer service. Consider providing a small gift in exchange for customers providing you with their email address. That way, you can reach out to those new customers in the future, increasing the long-term value of each new customer.

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