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Sales Tax Holidays: What to Know if You're a Retailer

3-minute read

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Emily Thompson

Emily Thompson

21 August 2023

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Sales tax holidays. Whether you love ‘em or hate ‘em, they’re here to stay. So as a small business owner, you might as well make the most of them. Tax holidays can bring more people through your door than at any other time of the year. But to truly profit, you’ll need to comply with your state’s regulations and brush up on your marketing skills.

How to Make the Most of a Sales Tax Holiday

Let’s face it. Tax-free holidays can be confusing. You can have more people enter your store, but somehow earn less. To really profit, you’ll need to comply with state laws, correctly price your products, and encourage customers to return. Fortunately, we have a few retail sales tips to help.

Tip 1: Know your state’s tax-free days.

It may seem like a no-brainer, but know the tax-free dates and plan ahead for them. As a small business owner, you’ll need to comply with these dates and keep careful records of them. You’ll also need detailed records for tax reporting purposes or if the IRS audits your business.

Tip 2: Understand which items qualify — and their price caps.

First, identify which items qualify as tax-free. For example, some states support children and families by offering tax-free school supplies. Other states allow clothes, groceries, or disaster relief items to be sold without tax. Depending on what you sell, not every item in your store may be sold without tax.

In addition, many states put price caps on goods that can be tax-free. For example, a state might say that items up to $100 qualify. That means if you sell an item that’s $110, a consumer would have to pay sales tax. The bottom line: It’s best to brush up on your state’s tax laws ahead of time and talk to an accountant if you have questions about them.

Tip 3: Prepare your staff and store.

A tax-free holiday can bring more people to your storefront. This is great news — as long as you’re prepared. Allow ample time ahead of the holiday to train your employees to abide by the holiday tax-free laws. Specifically, they’ll need to know:

  • Which types of items are tax-free
  • If there are price caps for qualifying items
  • How to apply a tax exemption in your store’s point-of-sale (POS) system

It’s also important to prepare your space for increased foot traffic. Ask yourself: Is there ample space to walk and shop? Is my inventory fully stocked? Do I have enough staff working to handle the traffic? These are questions you should answer well before a tax-free holiday begins.

Tip 4: Adjust your pricing.

As we mentioned, many states put a cap on items that qualify for tax-free holidays. As a result, it may make sense to temporarily lower your prices so they meet this cap — and sell. For example, if your state puts a $100 price cap on disaster-relief items, and you sell a multifunctional tool and knife for $105, consider lowering the price to $99 during the tax-free holiday.

Alternatively, you may benefit from slightly raising the price. This way you can capitalize on some of what consumers normally would pay in sales tax. For example, if your state’s sales tax rate is 6.25%, you could raise the price of an item by 3%. Consumers still get a break and your business profits. It’s a win for everyone.

Tip 5: Amp up your marketing.

This is the time to get loud and market your business well. After all, tax-free holidays can create a lot of noise and competition for your business. Think about what you’ll do to bring customers to your store, rather than to your competitions’.

Ahead of the holiday, try out some of these promotional activities:

  • Email marketing campaigns – If you have an email list (and hopefully you do), blast out a promotional email alerting customers of the upcoming holiday and any special offers you will have. For example, if you’ve lowered your price to meet the tax-free price cap, make sure your customers know.
  • Social media promotions – Facebook, Instagram, and other social media platforms are the perfect way to create excitement about the tax holiday and buzz about your business.
  • In-store events – Now’s the time to get creative. Host an in-store event, say live music, free beverages, or a workshop. If you promote it, customers will come.
  • Loyalty rewards – Honor repeat customers by offering extra deals in addition to the tax-free products.
  • Online advertising – If you don’t already use pay-per-click (PPC) advertising, try it out. PPC can be a very effective way to spread the word about your retail business and grow your business.
  • Extended hours – There’s never enough time in the day to shop, right? Just for the holiday, consider extending your hours to allow for more flexibility and more customers.

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Stay Prepared Even After the Sales Tax Holiday

If you don’t already have business insurance, or if you’re considering switching policies, now’s the time. You don’t want an accident happening during a tax-free holiday while you have “less-than-ideal” coverage.

At Simply Business, we can help you find one of these affordable insurance policies and more:

Plus, we’ll make it easy and fast. Just fill out our online quote form and answer a few questions about your business. Then we’ll show you policies for you to choose from to help protect your retail store and to meet your budget. Prefer a phone call? No problem. Give one of our licensed insurance agents a call today. They’re here to help guide you through the process and answer any of your questions.

Tax-Free Days are an Opportunity

Our advice is simple: As a retailer, there’s no need to dread busy tax-free days. Instead, prepare for them and look forward to the opportunities that they may bring. This may be the big break that you’ve been looking for — and a time to get ahead of your business’s yearly profits.

Emily Thompson

Written by

Emily Thompson

I earned a B.A. in Journalism from the University of Wisconsin at Madison (go Bucky). After realizing my first job might involve carrying a police scanner at 2 am in pursuit of “newsworthy” crimes, I decided I was better suited for freelance blogging and marketing writing. Since 2010, I’ve owned my freelance writing business, EST Creative. When I’m not penning, doodling ideas, or chatting with clients, you’ll find me hiking with my husband, baby boy, and 2 mischievous mutts.

Emily writes on a number of topics such as entrepreneurship, small business networking, and budgeting.

This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer

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