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HomeMy WebLinkAboutIR 8230 s, INFORMAL REPORT TO CITY COUNCIL MEMBERS No. a no * To the Mayor and Members of the City Council February 22, 2000 �t . * . Subject: Three-Day Sales Tax Holiday August 4-6, 2000 .Background During the 76`t' Legislative Session (1999), the Texas Legislature passed Senate Bill 441, which includes provisions for an annual three-day "sales tax holiday" beginning the first Friday in August. The intent of the holiday is to afford shoppers the opportunity to purchase certain tax- exempt items for the upcoming school year. Governor Bush signed the bill into law on June 3, 1999. Please see Attachment A, which is a copy of the portion of SB441 relevant to the sales tax holiday. During the first year of implementation (August 6-8, 1999), businesses were advised to waive the fill sales tax for exempt items, including the State's 6.25% portion and any additional local percentage. During the second year of implementation (August 4-6, 2000), local taxing authorities such as the City of Fort Worth reserve the right to repeal the exemption of the local portion of the sales tax. Local taxing authorities who wish to repeal the exemption for the August 2000 sales tax holiday must notify the State Comptroller's Office by March 31, 2000. Please see Attachment B for information distributed by the State Comptroller's Office in July 1999 regarding exempt items and the right of local taxing authorities to repeal the local portion of the exemption in the Year 2000. y Options for City of Fort Worth 1. The City of Forth Worth can comply with the sales tax holiday to the fullest extent, which means that Fort Worth businesses would not charge any sales tax for exempt items during that period. The City of Fort Worth currently charges 8.25%, which includes 6.25% for the State, 1% for the General Fund, 0.5% for the Crime Control & Prevention District, and 0.5% for the Fort Worth Transportation Authority (The T). 2. The City of Fort Worth can repeal the local exemption and charge 2% for items which are otherwise exempt from the State portion of the sales tax during the three-day period. The repeal requires a public hearing, a City Council vote, and advance notification of the State Comptroller's Office of the results of that vote by March 31, 2000. Revenue Impact The State Comptroller's Office claims that an accurate calculation of the revenue impact caused by a local taxing authority's repeal of the exemption would be difficult, if not impossible, to perform. When businesses report sales tax revenue to the State, they do not provide an itemization of exempt and non-exempt items. Businesses submit their sales tax returns either monthly, quarterly, or annually, depending on the amount of sales tax revenue they typically generate. Therefore, it is difficult for the Comptroller's Office to isolate the exempt items, the precise day on which they were sold, or the revenue impact of the sales tax holiday. Given those — ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8 230 r To the Mayor and Members of the City Council February 22, 2000 r� Page 2 of 2 Subject: Three-Day Sales Tax Holiday August 4-6, 2000 constraints, the Comptroller's Office cannot determine exactly how much tax revenue would be lost or gained in the event that a local taxing authority voted to repeal the local sales tax exemption. However, the Comptroller's Office did publish a projected local sales tax savings of $15.5 million over a two-year period (1999-2000) resulting from the sales tax holiday. Based on historical sales tax revenue data, businesses in the City of Fort Worth reasonably could expect to generate a total of$375,000 per day during the sales tax holiday by charging the 2% local tax for all items sold. That's a three-day total of$1,125,000 in sales tax revenue that would be split among the General Fund ($562,500), the T ($241,250), and the Crime Control & Prevention District ($241,250). The City of Fort Worth would not miss out on the entire $1,125,000 if the City decided to fully participate in the three-day holiday and waive the 2% local tax, because only a percentage of the items purchased during the holiday ivould actually be tax-exempt. All other purchased items would generate sales tax revenue at the normal tax rate. Assuming 10% of the items were tax-exempt under the holiday rule, the City would miss out on $112,500 in local sales tax revenue by waiving the 2% local tax on exempt items. That's a loss of$56,250 for the General Fund, $24,125 for the T, and $24,125 for the Crime Control & Prevention District. Recommendations It is recommended that the City of Fort Worth fully participate in the sales tax holiday scheduled for August 4-6, 2000. This implies that the City should not charge any sales tax on exempt items during the three-day holiday. According to the State Comptroller's Office, several local taxing authorities have inquired about the possibility of repealing the local exemption, but no official repeal notifications have been submitted (as of February 9, 2000). The City of Fort Worth reasonably can consider the surrounding communities as competitors in the sales tax re%-enue market. If Fort Worth opts to repeal the local 2% exemption, shoppers may take their business to those competitors during the sales tax holiday. Since shoppers will purchase many non-exempt items along with exempt items, we feel that the temporary loss of business in Fort Worth would have a negative impact on sales tax revenue derived from non-exempt items. Bob Terrell City Nfanager Attachments ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS Attachment A Excerpts taken from SB441, Enrolled Version: "SECTION 7. Subchapter H, Chapter 151, Tax Code, is amended by adding Section 151.326 to read as follows: Sec. 151.326. CLOTHING AND FOOTWEAR. FOR LIMITED PERIOD. (a) The sale of an article of clothing or footwear designed to be worn on or about the human body is exempted from the taxes imposed by this chapter if. (1) the sales price of the article is less than $100; and (2) the sale takes place during a period beginning at 12:01 a.m. on the first Friday in August and ending at 12 midnight on the following Sunday. (b) This section does not apply to: (1) any special clothing or footwear that is primarily designed for athletic activity or protective use and that is not normally worn except when used for the athletic activity or protective use for which it is designed; (2) accessories, including jewelry, handbags, luggage, umbrellas, wallets, watches, and similar items carried on or about the human body, without regard to whether worn on the body in a manner characteristic of clothing; and (3) the rental of clothing or footwear. (c) On or after January 1, 2000, the governing body o1 a local taxing authority may repeal the application of this exemption in the manner provided by Chapter 326." Regarding the repeal by a local taxing authority: "Sec. 326.002. STATE EXEMPTIONS. Notwithstanding any other law, an exemption to the state sales and use tax provided by Chapter 151 does not apply to a local sales and use tax to which this chapter applies if: (1) the governing body of the local taxing authority repeals the exemption in the manner provided by Section 326.003; and (2) the exemption provided by Chapter 151 specifically provides that the governing body of the local taxing authority may repeal the exemption in the manner provided by this chapter. Sec. 326.003. REPEAL BY LOCAL TAXING AUTHORITY. (a) The governing body of a taxing authority may by a majority vote adopt an appropriate order, including an ordinance, to repeal the application of an exemption described by Section 326.002. (b) The governing body must hold a public hearing before taking a vote. (c) A taxing authority that has repealed the application of an exemption under this section may in or?"111 the same manner reinstate the exemption. (d) A vote of the governing body of a taxing authority repealing the application or reinstating the exemption must be entered in the minutes for the meeting. The secretary of the taxing authority shall send to the comptroller by certified or registered mail a copy of the order adopted under this section. Sec. 326.004. EFFECTIVE DATE. The repeal of the application of the exemption or a reinstated exemption under Section 326.003 takes effect within the taxing authority on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a copy of the order adopted under that section." Essentially, CFW must notify the Comptroller before the end of the first quarter (1farch 31, 2000) because the holiday takes place in the third quurter. A full calendar quarter (the second) must fall in between the two events to make the decision binding. ........... OPP, Attachment B Sales tax holiday information made available by the State Comptroller's Office in July 1999 Sales Tax Holiday Page 1 of I Home Search Site Map What's New Contact Us Carole Keeton Rylander M Texas Comptroller of Public Accounts Texas Taxes .w , The Sales Tax Sales Tax Holiday August 6-8, 1999 Texans get a break from state and local sales taxes on Aug. 6, 7 and 8, the state's first annual tax holiday, The Texas Legislature exempted most clothing and footwear priced under $100 from sales and use taxes, That could save shoppers about $8 on every $100 they spend. • Selected list of items • A message from Comptroller Rylander r _ _ . Extended list of items • Sales Tax Holiday Tax Rule W orking for Texas Taxpayers... Selected list of items and their exemption status on the sales tax holiday. TAX-FREE TAXED Baby clothes Accessories (generally)--barrettes, elastic Bathing suits pony tail holders wallets, watches Belts with attached buckles Backpacks Boots--cowboy, hiking Baseball cleats and pants Bras Belt hackles (without belt) Bridal apparel (not rentals) Boots--climbing, fishing, rubber work boots, Caps/hats--baseball, fishing, golf, knitted ski, waders Choir robes Cloth and lace, knitting yarns and other Coats and wraps fabrics Costumes Dry cleaning services Diapers--adult and baby Football pants l Dresses Golf doves Formal clothing Handbags and purses http://,�vw`,v.window.state.tx,us/taxinfo/holiday/index.html 02/16/2000 Sales Tax Holiday Page 2 of 3 Gloves (generally) Handkerchiefs Gym suits and uniforms Hard hats Hooded shirts and hooded sweatshirts Helmets--bike, baseball, football, hockey, Hosiery motorcycle, sports Jackets Ice skates Jeans Jewelry Jerseys--baseball and football Laundering services Jogging apparel, such as bras., suits and Leather goods--except belts and wearing shorts apparel Lingerie Pads--football, hockey, soccer, elbow, knee, Neckwear and ties shoulder Pajamas Personal flotation devices Pants and trousers Rented clothing (including uniforms, formal Raincoats and ponchos wear, and costumes) Robes Roller blades and skates Shirts Safety clothing, glasses Shoes--sandals, slippers, sneakers, tenrus, Shoes--bicycle (cleated), bowling, golf walking Socks (including athletic) Shorts Suits, slacks and Jackets Sweatshirts Sweat suits Sweaters SWIM Suits and trunks Tuxedos (not rentals) Work clothes and uru'fonns Underclothes A Message from Comptroller Rylander July 12, 1999 Dear Taxpayer: I am sending you this information to help you plan for the new sales tax holiday for clothing and footwear, which be-ins this year at 12:01 a.m. August 6th and ends at midnight August Sth. The tax break, which is expected to save Texas consumers $69.2 In million in state sales taxes, and up to another$15.5 million in local sales taxes over the biennium, was approved by the 1999 Texas Legislature. Cuttin,, taxes is one of the 10 priorities I laid out for Texas in the 21st Century, so I am pleased to be able to do my part to make this tax holiday successful. I hope the enclosed rule and list will answer most of your questions about the tax holiday. I have also enclosed a flyer, which I encourage you to post in a prominent place in your store in advance of the tax holiday to prepare Your customers for it. We could not put every possible item that qualifies for the exemption on the list, so please call my office if you have questions about Other items. After this year's tax holiday, we will revise the rule and list to address questions that come up during the first ho liday. Here are some highlights about the sales tax holiday: highlights 02/16/2000 ..........................- Sales Tax Holiday Page 3 of 3 • The tax holiday will be held every year on the first Friday, Saturday, and Sunday of August. This year, both state and local sales taxes will be waived. In future years, however, while the state sales tax will continue to be waived, cities, counties, and other local taxinp, entities will have the choice of participating in the holiday or continuing, to impose the tax. • Most clothing and footwear priced at less than $100 will be exempt from sales taxes. Customers will receive the break on individual items, regardless of the amount they buy. For example, sales tax is not due if a customer buys six shirts, each priced at under$100. But the full tax must be paid on a shirt if it is sold for $110; the first $99.99 cannot be exempted. • Clothing and footwear that are used primarily for athletic activities or for protective wear are not eligible for the exemption. Customers buying golf cleats and football pads, for instance, must pay sales taxes. But the tax will be waived on athletic wear that is commonly worn other than while participating in an athletic activity, such as tennis shoes, baseball caps, and jogging suits. • Also not included in the sales tax holiday are accessories, such as jewelry and watches; items that are carried rather than worn, including handbags, briefcases, and wallets; and clothing rentals, such as formal wear and costumes rentals; and repairs and alterations. I hope you will find this information helpful. If you have questions about the sales tax holiday, please call my toll-free tax assistance line at 1-800-252-5555. Sincerely, Carole Keeton Rylander Comptroller of Public Accounts Carole Keeton Rvlander - Texas Comptroller of Public Accounts Window on State Government http://wNv-w,window.state.tx,us/taxinfoiholiday/'*Index.html 02/16/2000 Sales Tax Holiday Page 1 of 6 Home Search Site Map What's New Contact Us Carole Keeton Rylander �g Texas Comptroller of Public Accounts e Tie Sas Tax Sales Tax Holiday Sales Tax Holiday Rule STATE OF TEXAS COMPTROLLER OF PUBLIC ACCOUNTS STATE SALES AND USE TAX Section 3.365. Sales of Clothing and Footwear During a Three-day Period in August. (Tax. Code, sec. 151.326 and sec. 151.3111). (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. Clothing or footwear - An article of wearing apparel designed to be worn on or about the human body. For the purposes of this section, the term does not include accessories, including jewelry, handbags, purses, briefcases, luggage, wallets, watches, and similar items carried on or " about the human body, without regard to whether worn on the body in a manner characteristic of clothing. (b) Exempt sales. (1) Sales or use tax is not due on the sale of an article of clothing or footwear if: (A) the sales price of the article is less than 5100; and (B) the sale takes place during a period beginning at 12:01 a.m. on the first Fridav in August and ending at 12 midnight of the following Sunday. For example, in 1999, this period begins at 12:01 a.m. on Friday, August 6, and ends at 12 midnight on Sunday, August $. (2)The exemption applies to each article of clothing or footwear selling for less than S 100, regardless of how many items are sold on the same invoice to a customer.-Far example, if a customer purchases two shirts for 580 each, both items qualify for the exemption, even though the customer's total purchase price (S 160) exceeds 599.99. (3)The exemption does not apply to the first $99.99 of an article of clothing or footwear selling for more than 599.99. For example, if a customer purchases a pair ofpants costing 5110, sales tax is due on the entire 5110. (c) Taxable sales. This exemption does not apply to: http://wwtiv.window.state.tx.us/taxinfo/holiday/nile.html 02/16/2000 Sales Tax Holiday page 2 of 6, (1)any special clothing or footwear that is primarily designed for athletic activity or protective use and that is not normally worn except when used for the athletic activity or protective use for which it is designed. For example, golf cleats and football pads are primarily designed for athletic activity or protective use and are not normally worn except when used for those purposes; therefore, they do not qualify for the exemption. However, tennis shoes,jogging suits, and swimsuits are commonly worn for purposes other than athletic activity and qualify for the exemption; (2)accessories, including jewelry, handbags,purses, briefcases, luggage, umbrellas, wallets, watches, and similar items carried on or about the human body, without regard to whether worn on the body in a manner characteristic of clothing, (3)the rental of clothing or footwear. For example, this exemption does not apply to rentals of formal wear, costumes, uniforms, diapers, and bowling shoes; (4)taxable services performed on the clothing or footwear, such as repair, remodeling, or maintenance services and cleaning or laundry services. For example, sales tax is due on alterations to clothing, even though the alterations may be sold, invoiced and paid for at the same time as the clothing being altered. It a customer purchases a pair of pants for $90 and pays $15 to have the pants cuffed, the $90 charge for the pants is exempt, but tax is due on the $15 alterations charge; and (5)purchases of items used to make or repair clothing or footwear, including fabric, thread, yarn, buttons, snaps, hooks, and zippers. (d) Articles normally sold as a unit. Articles that are normally sold as a unit must continue to be sold in that manner; they cannot be priced separately and sold as individual items in order to obtain the exemption. For example, if a pair of shoes sells for $150, the pair cannot be split in order to sell each shoe for$75 to qualify for the exemption. If a suit is normally priced at $225 on a single price tag, the suit cannot be split into separate articles so that any of the components may be sold for less than $100 in order to qualify for the exemption. However, components that are normally priced as separate articles may :Dntinue to be sold as separate articles and qualify for the exemption if the price of an article is less than$100. (e)Sales of sets containing both exempt and taxable items. (1) When exempt clothing or footwear is sold together with taxable merchandise as a set or single unit, the full price is subject to sales tax unless the price of the exempt clothing or footwear is separately stated. For example, if a boxed gift set consisting of a French-cuff dress shirt, cufflinks, and a tie tack is sold for a single price of$95, the fir 11 price of the boxed gift set is taxable because the cufflinks and tie tack are taxable and the sales price of the shirt is not separately stated. (2)When exempt clothing is sold in a set that also contains taxable merchandise as a free gift and no additional charge is made for the gift, the �t exempt clothing may qualify for this exemption. For example, a boxed set may contain a tie and a free tie tack. If the price of the set is the same as the price of the tie sold separately, the item being sold is the tie, which is http,//w-,v-w,w1ndow.state.tx.us/taxinfo/'holiday/ruIc.html 02/16/2000 Sales Tax Holiday Page 3 of 6 exempt from tax if sold for less than $100 during the exemption period. Note: When a retailer gives an item away free of charge, the retailer owes sales or use tax on the purchase price the retailer paid for the item. (f)Discounts and coupons. (1) A retailer may offer discounts to reduce the sales price of an item. if the discount reduces the sales price of an item to $99.99 or less, the item may qualify for the exemption. For example, a customer buys a$150 dress and a $100 blouse from a retailer offering a 10% discount. After applying the 10% discount, the final sales price of the dress is $135, and the blouse is $90. The dress is taxable (it is over $99.99), and the blouse is exempt (it is less than $99.99). (2) When coupons are accepted by retailers as a part of the selling price of any taxable item, the value of the coupon is excludable from the tax as a cash discount, regardless of whether the retailer is reimbursed for the amount represented by the coupon. Therefore, a coupon can be used to reduce the sales price of an item to 599.99 or less in order to qualify for the exemption. For example, if a customer purchases a pair of shoes priced at $110 with a coupon worth $20 off, the final sales price of the shoes is $90, and the shoes qualify for the exemption. (g)Buy one, get one free or for a reduced price. The total price of items advertised as "buy one, get one free," or "buy one, get one for a reduced price," cannot be averaged in order for both items to qualify for the exemption. The following examples illustrate how such sales should be handled. (1)A retailer advertises pants as "buy one, get one free." The first pair of pants is priced at S 120; the second pair of pants is free. Tax is due on $120. Having advertised that the second pair is free, the store cannot ring up each pair of pants for $60 in order for the items to qualify for the exemption. However, if the retailer advertises and sells the pants for 50% off, selling each pair of S 120 pants for S60, each pair of pants qualifies for the exemption. Note: When a retailer gives an item away free of charge, the retailer owes sales or use tax on the purchase price the retailer paid for the item. (2)A retailer advertises shoes as "buy one pair at the regular price, get a second pair for half price." The first pair of shoes is sold for S 100; the second pair is sold for $50 (half price). Tax is due on the S 100 shoes, but not on the $50 shoes. Having advertised that the second pair is half price, the store cannot ring up each pair of shoes for S75 in order for the items to qualify for the exemption. However, if the retailer advertises the shoes for 25% off, thereby selling each pair of$100 shoes for $75, each pair of shoes qualifies for the exemption. (h)Rebates. Rebates occur after the sale and do not affect the sales price of an item purchased. For example, a customer purchases a sweater for $110 and receives a $12 rebate from the manufacturer. The retailer must collect tax on the ;110 sales price of the sweater. ' " (i) Layaway sales. A layaway sale is a transaction in which merchandise is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time, and, at the end of the payment period, receives the http://www.window.state.tx.us/taxinfo/holiday/rul.e.html 02/16/2000 Sales Tax Holiday Page 4 of 6 merchandise. Under the Texas sales tax law, a sale of tangible personal property occurs when a purchaser receives title to or possession of the property for consideration. Therefore, if final payment on a layaway order is made by, and the merchandise is given to, the customer during the exemption period, that sale of eligible clothing may qualify for the exemption. O)Rain checks. Eligible items purchased during the exemption period using a rain check will qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check during, the exemption period will not qualify an eligible item for the exemption if the item is actually purchased after the exemption period. (k)Exchanges. (1)If a customer purchases an item of eligible clothing or footwear during the exemption period, and later exchanges the item for the same item (different size, different color, etc.), no additional tax will be due even if the exchange is made after the exemption period. (2)If a customer purchases an item of eligible clothing or footwear during I I the exemption period, and after the exemption period has ended returns the item and receives credit on the purchase of a different item, the appropriate sales tax will apply to the sale of the newly purchased item. (3)If a customer purchases an item of eligible clothing or footwear before the exemption period, and during, the exemption period returns the item and receives credit on the purchase of a different item of eligible clothing or footwear, no sales tax is due on the sale of the new item if it is purchased during the exemption period. (4)Examples: (A) A customer purchases a S35 shirt during the exemption period. After the exemption period, the customer exchanges the shirt for the same shirt in a different size. Tax is not due on the S35 price of (B)A customer purchases a S35 shirt during the exemption period. After the exemption period, the customer exchanges the shirt for a S35 5 jacket. Because the jacket was not purchased during the exemption period, tax is due on the S35 price of the jacket. (C)During the exemption period, a customer purchases a S90 dress that qualifies for the exemption. Later, during the exemption period, the customer exchanges the $90 dress for a 5150 dress. Tax is due on the $150 dress. The $90 credit from the returned item cannot be used to reduce the sales price of the $150 item to $60 for exemption purposes. (D) During the exemption period, a customer purchases a$60 dress that qualifies for the exemption. Later, during the exemption period, the customer exchanges the $60 dress for a $95 dress. Tax is not due on the $95 dress because it was also purchased during the exemption period and otherwise meets the qualifications for the exemption. http://www.window.state.tx.us/taxinfo/holiday/rule.htm1 02/16/2000 Sales Tax.Holiday Page 5 of 6 (1)Returned merchandise. For a thirty-day period after the temporary exemption period, when a customer returns an item that would qualify fqr the exemption, no credit for or refund of sales tax shall be given unless the customer provides a receipt or invoice showing tax was paid, or the retailer has sufficient documentation to show that tax was paid on the specific item. This thirty-day period is set solely for the purpose of designating a time period during which the customer must provide documentation showing that sales tax was paid on returned merchandise. The thirty-day period is not intended to change a retailer's policy concerning the time period during which the retailer will accept returns. (m) Mail, telephone, e-mail, and Internet orders and custom orders. Under the Texas sales tax law, a sale of tangible personal property occurs when a purchaser receives title to or possession of the property for consideration. Therefore, an item of eligible clothing or footwear may qualify for this exemption if: (1) the item is both delivered to and paid for by the customer during the exemption period; or (2)the item is ordered and paid for by the customer and the order is accepted by the retailer during the exemption period for immediate shipment, even if delivery is made after the exemption period. An order is accepted by the retailer when it has taken an action to fill the order for immediate shipment. Actions to fill an order include placing an "in date" stamp on a mail order or assigning an "order number" to a telephone order. An order is for immediate shipment when delayed shipment is not requested by the customer. 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 company. (n)Shipping and handling charges. (1)Shipping and handling charges are included as part of the sales price of the clothing or footwear, whether or not separately stated. Except as provided in paragraph (2) of this subsection, if multiple items are shipped on a single invoice, the shipping and handling charge must be proportionately allocated to each item ordered, and separately identified on the invoice, to determine if any items qualify for the exemption. The following examples illustrate the way these charges should be handled: (A)A customer orders a Jacket for$95. The shipping charge to deliver the jacket to the customer is 55.00. The sales price of the jacket is 5100. Tax is due on the full sales price. (B) A customer orders a suit for 5285 and a shirt for $95. The charge to deliver the items is $15. The 515 shipping charge must be proportionately and separately allocated between the items: $285 / $380 = 75°0; therefore, 75 1/,0 of the 515 shipping charge, or $11.25, must be allocated to the suit, and separately identified on the invoice as such. The remaining 25% of the 515 shipping charge, or$3.75, must be allocated to the shirt, and separately identified on the invoice as such. The sales price of the shirt is $95 phis 53.75, totaling 598.75; therefore, the shirt qualifies for the exemption. http://�vww.window.state.tx.us/taxinfo/holiday/rLile.htmt 02/16/1-000 Sales Tax Holiday Page 6 of 6 (C)A customer orders a suit for$285 and a shirt for$95. The charge to deliver the items is $20. The $20 shipping charge must be proportionately and separately allocated between the items: $285 / $380 =75%; therefore, 75% of the $20 shipping charge, or $15, must be allocated to the suit, and separately identified on the invoice as such. The remaining 25% of the $20 shipping charge, or$5.00, must be allocated to the shirt, and separately identified on the invoice as such. The sales price of the shirt is $95 plus $5.00, totaling $100; because the sales price of the shirt exceeds $99.99, the purchase of the shirt is taxable. (2)If the shipping and handling charge is a flat rate per package and the amount charged is the same regardless of how many items are included in the package, for purposes of this exemption the total charge may be attributed to one of the items in the package rather than proportionately and separately allocated between the items. For example, a customer orders five shirts, four priced at $98 and one at $85, and the retailer charges $10 for shipping and handling the order. The retailer would have charged the same amount for shipping and handling whether the customer ordered one shirt or five shirts. The retailer may chose to attribute the $10 shipping and handling charge to the shirt sold for$85 rather than allocate the charge proportionately and separately between the shirts. If the charge is attributed to the S85 shirt, the sales price of that shirt is $9'5, and all of the shirts will qualify for the exemption. (o)Documenting exempt sales. The retailer is not required to obtain an exemption certificate on sales of eligible items during the exemption period. However, the retailer's records should clearly identify the type of item sold, the date the item was sold, and the h sales price of the item. (p) Reporting exempt sales. No special reporting procedures are necessary to report exempt sales made during the exemption period. Sales should be reported as currently required by law. Effective Date: July 5, 1999 Filed with Secretary of State: July 5, 1999 CAROLE KEETON RYLAN`NDER Comptroller of Public Accounts Carole Keeton Rylander - Texas Comptroller of Public Accounts Window on State Govermnent http://wwNv.window.state.tx.us/'tax1nfo/holiday/rule.htmi 02/16/2000