In March 2018, Ohio lawmakers made the sales tax holiday the first weekend in August permanent. After trying it one year at a time, for three years, everyone decided to keep it going. The idea is to ease expenses as families head into back-to-school time. Let’s talk about how it affects consumers and business owners, and what to know ahead of this year’s Ohio sales tax holiday August 3-5.
The Sales Tax Holiday is only one weekend, from 12 a.m August 3, 2018, until 11:59 p.m August 6, 2018. As the Ohio Department of Taxation explains, the following items do not incur sales and use tax:
- Clothing priced at $75 and under
- School supplies at or less than $20 per item
- Instructional materials priced at $20 or less per item
- Qualifying items purchased online and accepted for immediate shipment during the holiday period
- New and picked-up layaway for qualifying items during the holiday period
How the Sales Tax Holiday Affects Business Owners
The brief tax savings is an obvious benefit for consumers, especially for those living in Greater Cincinnati on a budget. But how does it fair for businesses? Opinions are mixed:
- The Tax Foundation’s “Sales Tax Holidays: Politically Expedient but Poor Tax Policy 2017” report criticizes its effectiveness for economic growth and relief.
- The Boston Globe’s July 4, 2017 “Save the Sales Tax Holiday” article rallied for the savings, to boost local commerce.
- The University of Cincinnati’s Economics Center “Focus on Ohio’s Future” 2016 report surmised a net increase of $4.7 million for the state.
Preparing for the Ohio Sales Tax Holiday
It’s important for business owners to know exactly what is and isn’t exempt, and to make sure that all employees are aware of the temporary change. The discounts may attract a higher volume of customers, so it’s necessary to increase inventory, if possible. It’s also critical that staff maintain top-quality customer service skills during an influx of questions and shopping demands. A QuickBooks article on how retailers can prepare, cited Retail Systems Research managing partner Paula Rosenblum’s advice:
“I’m a fan of staying reasonably close on price and differentiating on service, especially for small retailers… Give them a reason to buy local by making it friendly and making it a good customer experience.”
Other ways to prepare include:
- Making sure that your systems are updated to reflect the sales tax holiday. Otherwise, customers won’t be charged correctly, creating delays at the counter, and possible reluctance to make future purchases.
- Easing the shopping experience by setting up clearly noticeable displays of school supplies and qualifying clothing. Providing some sort of entertainment for kids while their parents shop, also allows for more time to make purchases.
- Putting related items on sale. Customers may also consider other items that are higher priced, since they’re saving on certain necessities. As the National Federation of Independent Business suggests, offer coordinating coupons and discounts.
- Keeping accurate accounting records. Audits for sales and use taxes can occur years after the specific holiday is past. You can avoid this by paying attention to the temporary tax changes, and checking for accounting discrepancies. Online retailers need to also remember this for state sales and e-commerce business record-keeping practices.
Simplify the process and reduce stress by preparing for the Ohio Sales Tax Holiday early. If you’re unsure about the accounting books, contact our team at DCA Certified Public Accountants. We’re here to help you with any questions and concerns!