Iowa‘s tax-free holiday is in one week, and it will give residents the chance to shop for clothing without paying state or local sales taxes.
The tax-free holiday begins on August 4 at 12:01 a.m. and goes until 11:59 p.m. on August 5. The event comes as families prepare for back-to-school shopping. Iowa sales taxes range from 6% to 7%, varying by location.
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The tax exemptions only apply to certain clothing and footwear items that are priced at less than $100.
What can Iowans buy during the tax-free holiday?
Clothing items, which are defined as wearing apparel, will be exempt from sales tax during the holiday. Typical shoes and diapers will also be tax-free. All items must be under $100.
Items like jewelry, umbrellas, sporting equipment, skates, and special clothing or footwear designed for primarily athletic activity will not be sales tax exempt.
School supplies, like backpacks, folders, and pencils, are also not included in the tax-free holiday.
Where can Iowans shop for tax-exempt items?
Big-box stores and small businesses will participate in the tax-free weekend. All businesses in Iowa that are open from August 4 to August 5 are required to participate.
Online purchases are also eligible for sales tax exemption.
Can Iowans use coupons or take advantage of sales during the tax-free holiday?
Items that are listed as “buy one, get one free” or “buy one, get one for a reduced price” cannot be averaged for both items to be exempt from sales tax.
However, if the first item is worth over $100 and the second is totaled as half off ($55), then the sales tax will be charged on the first item, but not the second, per the Iowa Department of Revenue.
Manufacturers’ coupons cannot be used to bring the price of an item below $100 to qualify for sales tax exemption. However, a store’s coupons and discounts can be used to bring the price of an item below $100 and will qualify for sales tax exemption.
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How can Iowans exchange tax-exempt purchases?
Iowans will not be charged an additional tax if they exchange a qualifying item for the same item that’s a different color or size.
However, if a customer purchases an eligible item during the exemption period and later returns that item for a different item or store credit, the sales tax associated with that location will apply to the price of the newly-purchased item.
