-1

Suppose a person buys something on a sales tax holiday.

Will that change his federal tax or state/local tax?

  1. Sales tax holiday is different for different states.

    • Does it mean that sales tax holiday only affects his state tax?

    • Do New York State and City have sales tax holiday?

  2. If sales tax holiday affects his federal tax, will the expense of the purchase become

    • a deduction when calculating his adjusted gross income, or
    • a deduction in his itemized deductions, or
    • a tax credit?

Thanks.

6

I believe you are confusing sales tax with income tax. The tax holidays in the US are only for sales tax. Consumers purchasing certain goods during the tax holiday do not have to pay sales tax like they normally would. Effectively the price is slightly lower during those days with the purpose of giving people an extra reason to shop at that time. During the tax holiday the stores make the exact same profit that they normally do, but they may experience a bump in sales simply because more people will shop during that time.

Income tax for both consumers and the businesses is not affected by this.

Although New York state was the first state to implement a tax holiday 20 years ago, they no longer have one today, though they do have certain goods which have a lower tax rate year round.

  • Thanks. Are there tax holidays for income tax? Is it correct that sale tax is not required to be reported in any form to IRS or state by any party, unlike income tax? – Tim Jan 8 '17 at 18:50
  • 1
    There aren't really tax holidays for income tax. The closest thing to that would be the government providing a tax credit if you purchase a particular item (house, solar panels, electric car) and then if the tax credit is only valid during a certain time window, but typically those types of time windows span years, not days. Consumers don't have to report sales tax, only the businesses that collect it do. They report those amounts to their local and state governments that receive the tax. If for some reason the business does not collect sales tax, consumers may owe use tax. – TTT Jan 8 '17 at 19:15
  • 1
    @Tim , you never need to report sales taxes to the IRS, as you paid it - it is not income. However, you get a deduction on income tax for any sales tax you paid, so it would be generally a good idea to report the sales tax you paid to the IRS, to get that amount income-tax free. – Aganju Jan 8 '17 at 22:45
  • @Aganju - Says the guy who lives in a state without income tax... good point though. Note you must itemize to take that deduction, and you have the option of deducting either state income tax or state sales tax. For most people the state income tax is a larger deduction than the sales tax, unless you live in a state that doesn't have income tax. Since OP lives in NY, he can forget about that deduction unless he itemizes and manages to spend more than he makes in a year. – TTT Jan 8 '17 at 22:58
  • Thanks. Which collect sale tax, federal IRS, or state or local, or both? – Tim Jan 10 '17 at 7:01

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.