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State & Local Tax Library
State & Local Taxes Weekly Newsletter
Top Stories for the week of 07/12/2010 - Volume 21, No. 28
Articles
Illinois Enacts 2010 Sales Tax Holiday for Clothing and School Supplies (07/12/2010)


State and Local Taxes Weekly,
Illinois Enacts 2010 Sales Tax Holiday for Clothing and School Supplies
by Matthew G. Pickelle, Esq. (RIA)
Illinois Governor Pat Quinn signed legislation that creates a sales tax holiday for certain clothing and school supplies from August 6, 2010 through August 15, 2010. During that period, a reduced 1.25% sales and use tax rate will apply to qualifying items. ( L. 2010, S3658 (P.A. 96–1012), effective 07/07/2010 .)
Reduced rate for clothing and school supplies. The legislation provides that a sales tax holiday will occur from August 6, 2010 through August 15, 2010. During that period, a reduced sales and use tax rate of 1.25% will apply to: (1) clothing items that each have a retail selling price of less than $100; and (2) school supplies.
Clothing: For purposes of the sales tax holiday, unless otherwise specified, “clothing” means all human wearing apparel suitable for general use. “Clothing” includes, but is not limited to: household and shop aprons; athletic supporters; bathing suits and caps; belts and suspenders; boots; coats and jackets; ear muffs; footlets; gloves and mittens for general use; hats and caps; hosiery; insoles for shoes; lab coats; neckties; overshoes; pantyhose; rainwear; rubber pants; sandals; scarves; shoes and shoelaces; slippers; sneakers; socks and stockings; steel-toed shoes; underwear; and school uniforms.
The definition of “clothing” does not include clothing accessories, protective equipment, or sport or recreational equipment. “Clothing accessories” means, but is not limited to: briefcases; cosmetics; hair notions, including, but not limited to barrettes, hair bows, and hair nets; handbags; handkerchiefs; jewelry; non-prescription sunglasses; umbrellas; wallets; watches; and wigs and hair pieces. “Protective equipment” means, but is not limited to: breathing masks; clean room apparel and equipment; ear and hearing protectors; face shields; hard hats; helmets; paint or dust respirators; protective gloves; safety glasses and goggles; safety belts; tool belts; and welder's gloves and masks. “Sport or recreational equipment” means, but is not limited to: ballet and tap shoes; cleated or spiked athletic shoes; gloves, including, but not limited to, baseball, bowling, boxing, hockey, and golf gloves; goggles; hand and elbow guards; life preservers and vests; mouth guards; roller and ice skates; shin guards; shoulder pads; ski boots; waders; and wetsuits and fins.
School supplies: “School supplies,” unless otherwise specified, means items used by a student in a course of study. The purchase of school supplies for use by persons other than students for use in a course of study are not eligible for the reduced rate of tax. “School supplies” includes, but is not limited to: binders; book bags; calculators; cellophane tape; blackboard chalk; compasses; composition books; crayons; erasers; expandable, pocket, plastic, and manila folders; glue, paste, and paste sticks; highlighters; index cards; index card boxes; legal pads; lunch boxes; markers; notebooks; paper, including loose leaf ruled notebook paper, copy paper, graph paper, tracing paper, manila paper, colored paper, poster board, and construction paper; pencils; pencil leads; pens; ink and ink refills for pens; pencil boxes and other school supply boxes; pencil sharpeners; protractors; rulers; scissors; and writing tablets.
The term “school supplies” does not include school art supplies; school instructional materials; cameras; film and memory cards; videocameras, tapes, and videotapes; computers; cell phones; Personal Digital Assistants (PDAs); handheld electronic schedulers; and school computer supplies. “School art supply” means an item commonly used by a student in a course of study for artwork and includes only the following items: clay and glazes; acrylic, tempera, and oil paint; paintbrushes for artwork; sketch and drawing pads; and watercolors. “School instructional material” means written material commonly used by a student in a course of study as a reference and to learn the subject being taught and includes only the following items: reference books; reference maps and globes; textbooks; and workbooks. “School computer supply” means an item commonly used by a student in a course of study in which a computer is used and applies only to the following items: flashdrives and other computer data storage devices; data storage media, such as diskettes and compact disks; boxes and cases for disk storage; external ports or drives; computer cases; computer cables; computer printers; and printer cartridges, toner, and ink.
Bundled sales. Items that qualify for the reduced rate of tax that are bundled together with items that do not qualify for the reduced rate of tax and that are sold for one itemized price will be subject to the reduced rate of tax only if the value of the items that qualify for the reduced rate of tax exceeds the value of the items that do not qualify for the reduced rate of tax.
Coupons and discounts. An unreimbursed discount by the seller reduces the sales price of the property so that the discounted sales price determines whether the sales price is within a sales tax holiday price threshold. A coupon or other reduction in the sales price is treated as a discount if the seller is not reimbursed for the coupon or reduction amount by a third party.
Splitting of items normally sold together. Articles that are normally sold as a single unit cannot be priced separately and sold as individual items in order to obtain the reduced rate of tax. For example, a pair of shoes cannot have each shoe sold separately so that the sales price of each shoe is within a sales tax holiday price threshold.
Rain checks. A rain check is a procedure that allows a customer to purchase an item at a certain price at a later time because the particular item was out of stock. Eligible property that customers purchase during the sales tax holiday period with the use of a rain check will qualify for the reduced rate of tax regardless of when the rain check was issued. The issuance of a rain check during the sales tax holiday period will not qualify eligible property for the reduced rate of tax if the property is actually purchased after the sales tax holiday period.
Exchanges. If a customer purchases an item of eligible property during the sales tax holiday period, but later exchanges the item for a similar eligible item, even if a different size, different color, or other feature, no additional tax is due even if the exchange is made after the sales tax holiday period. If a customer purchases an item of eligible property during the sales tax holiday period, but after the sales tax holiday period has ended, the customer returns the item and receives credit on the purchase of a different item, the 6.25% general merchandise sales tax rate is due on the sale of the newly purchased item. If a customer purchases an item of eligible property before the sales tax holiday period, but during the sales tax holiday period the customer returns the item and receives credit on the purchase of a different item of eligible property, the reduced rate of tax is due on the sale of the new item if the new item is purchased during the sales tax holiday period.
Delivery charges. Delivery charges, including shipping, handling and service charges, are part of the sales price of eligible property.
Order date and back orders. For the purpose of a sales tax holiday, eligible property qualifies for the reduced rate of tax if: (1) the item is both delivered to and paid for by the customer during the sales tax holiday period; or (2) the customer orders and pays for the item and the seller accepts the order during the sales tax holiday period for immediate shipment, even if delivery is made after the sales tax holiday period. The seller accepts an order when the seller has taken action to fill the order for immediate shipment. Actions to fill an order include placement of an “in date” stamp on an order or assignment of an “order number” to an order within the sales tax holiday period. An order is for immediate shipment when the customer does not request delayed shipment. An order is for immediate shipment notwithstanding that the shipment may be delayed because of a backlog of orders or because stock is currently unavailable to, or on back order by, the seller.
Returns. For a 60-day period immediately after the sales tax holiday period, if a customer returns an item that would qualify for the reduced rate of tax, credit for or refund of sales tax shall be given only at the reduced rate unless the customer provides a receipt or invoice that shows tax was paid at the 6.25% general merchandise rate, or the seller has sufficient documentation to show that tax was paid at the 6.25% general merchandise rate on the specific item. This 60-day period is set solely for the purpose of designating a time period during which the customer must provide documentation that shows that the appropriate sales tax rate was paid on returned merchandise. The 60-day period is not intended to change a seller's policy on the time period during which the seller will accept returns.
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