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Iowa sales tax holiday: How to save on back-to-school shopping; plus, what is tax-free?

Katie Akin
Des Moines Register

The return to school may look a lot different this year, but one thing in Iowa remains the same: tax-free, back-to-school shopping.

Despite the drubbing the state's tax revenues have taken from the COVID-19 pandemic, this year's tax-free weekend will go on as scheduled Aug. 7-8. Shoppers can save on clothing for kids and adults.

Here's what you need to know to take advantage of this year's sales tax holiday: 

When is the tax-free weekend?

Iowa's annual tax-free weekend begins the first Friday in August. This year, it will start at 12:01 a.m. Friday, Aug. 7, and continue for 48 hours, ending at midnight Saturday. Sunday is not included in the tax-free weekend.

What items are tax-free? Are masks included?

Articles of clothing or shoes that cost under $100 will not be taxed. The $100 limit applies to individual items, rather than the total of all purchases. For instance, a shopper could buy two pairs of shoes, priced at $95 per pair, and still receive the tax abatement on both. 

Although schools may require face coverings for everyday use, masks will be taxed. John Fuller, a spokesperson for the Department of Revenue, explained that both reusable cloth masks and disposable face coverings qualify as protective equipment, rather than clothing.

A full list of tax-exempt items is available at the Iowa Department of Revenue website. Just navigate to tax.iowa.gov and click on the "Sales Tax Holiday" tab.

Can I shop tax-free online?

Yes. Iowa's sales tax holiday extends to online shopping, even at retailers that are not based in Iowa. The same rules apply as for brick-and-mortar shopping.

If an online retailer applies state sales tax on your order, the Iowa Department of Revenue will reimburse you if you file an IA 843 Claim for Refund form, available for printing online at the Iowa Department of Revenue website. To find it, visit the sales tax holiday page, as above, and navigate to the section on refunds. 

Do coupons and sales affect the tax holiday?

Here's how sales and coupons interact with the sales tax holiday rules:

  • Buy one, get one free. If an item costs more than $100, the sales tax will apply — even if you're getting a second item of the same value for free.
  • Buy one, get one half off. If the first item costs $110 and you can get a second for half off ($55), then sales tax will be charged on the first item, but not the second. 
  • Manufacturer's coupon. If an item costs $110 and the customer presents a manufacturer's coupon that lowers the price to $90, sales tax will still be applied. A manufacturer's coupon does not change the sale price of an item.
  • Store coupon or discount. If a store coupon or discount brings the price of an item under $100, it will be exempt from sales tax.

Is there any chance the tax holiday could go away?

It seems unlikely, though there is no telling how long the pandemic recession will last, or how lawmakers will be feeling about the state's revenues next year. Between March and April, when many businesses in Iowa were closed, the state collected $307 million less in taxes than it did in the same period of 2019.

The economic effects are expected to continue: The Iowa Legislature predicted in May that the state will take in $65 million less in revenue in the fiscal year that began July 1 than it did in the previous one.

Also, Iowa is among a slowly dwindling minority of states —16 — holding a sales tax holiday. The practice has fallen out of favor in some locales as it's become apparent that it does little to boost the economy. Knowing when sales tax holidays are scheduled, people tend to wait to do their buying until then and don't end up spending more money overall than they would have otherwise. 

But Iowa's tax holiday has endured since 2000, far longer than most, according to the Federation of Tax Administrators. Also, compared with those in some other states, the scope is modest. In places such as Florida, Texas and Alabama, there are two multiday tax holidays each year: One for back-to-school items and another for hurricane season supplies, when people can spend up to $1,000 on a generator and not pay tax. And in Texas, the back-to-school tax holiday coincides with yet another for purchases of energy-saving appliances, such as air conditioners, costing up to $6,000.

By comparison, Iowa's tax holiday is for a single, 48-hour period and applies only to clothing items costing $100 or less.

Katie Akin is a retail reporter for the Register. Reach her at kakin@registermedia.com or at 515-284-8041. Follow her on Twitter at @katie_akin.

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