Sales tax holiday helps Wisconsin families head back to school

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School supplies
Most school supplies and clothing will be exempt from Wisconsin sales tax for a short period between Wednesday and Sunday this week.

It’s a sales tax break designed to help spur sales for retailers, as well as and save a few dollars for Wisconsin families getting ready to send their kids back to school.

A Wisconsin sales tax holiday will begin at 12:01 a.m. Wednesday and continue through 11:59 p.m. Sunday. Don’t rush off to the car dealer, however, the items that are exempt from sales taxes fall into a short list.

For this brief tax break, the following items will be exempt:

  • Clothing – sales price of each item must be $75 or less
  • Computer purchased by a consumer for personal use – sales price of each computer must be $750 or less
  • School computer supplies purchased by the consumer for their personal use – sales price of each item must be $250 or less
  • School supplies – sale price of each item must be $75 or less
School supplies
Legal pads, exempt …

But while a family may save the sales tax on the purchase of a three-ring binder and ruled paper, it can’t get the tax break on materials for an art class. And the instructional supplies a teacher might purchase for her classroom will not be exempt.

According to Department of Revenue definitions, “’Clothing’ means any wearing apparel for humans that is suitable for general use. Sales of clothing during the sales tax holiday are if the sales price for any single item is $75 or less.”

School supplies
… sketch pads, not exempt.

“School supply” for the purposes of the sales tax holiday means items that are commonly used by a student in a course of study, but not including a school art supply, school computer supply, or school instructional material. Sales of school supplies are exempt during the sales tax holiday if the sales price for any single item is $75 or less.

It gets confusing. Legal pads, for example, are exempt. Sketch and drawing pads, are not exempt.

Navigating the landscape of the sales tax holiday can be a challenge for retailers. Retailers must include all exempt sales made during the sales tax holiday in the total sales amount on Line 1 of the Wisconsin Sales and Use Tax Return using Form ST-12. These exempt sales are included on Line 3, “Sales of exempt property and services,” that get subtracted from total sales.

Businesses get a break, too

Businesses can purchase clothing and school supplies exempt from tax during the sales tax holiday if each item is under the price threshold.

According to the state, purchases of computers and school computer supplies by businesses are taxable since the exemption requires that these items must be purchased for the consumer’s personal use. If a business is not charged sales tax by the retailer on its purchases of computers and school computer supplies, the business is liable for use tax on the purchase price of such items, unless another exemption, such as resale, applies.

CPA and consulting firm Schenck, in an advisory on its website, notes: “The sales tax holiday may add some complexity for retailers as they need to take steps to ensure their point of sale systems are updated in advance of the sales tax holiday. Retailers do not have to collect exemption certificates for items that qualify for the sales tax holiday.”