Candy, flowers, diamonds, romantic dinners out or a movie snuggled on the couch: The year’s biggest day for dates looms again, and here’s an update on sales tax considerations for Valentine’s Day.
Expected spending on gifts this year should average $192.80, up almost 10% from last year, according to the National Retail Foundation. Once again, the top shopping destination to purchase Valentine’s Day gifts is online (35%), closely followed by department stores (34%) and discount stores (31%). Those aged 35 to 44 will outspend other age groups.
The top gifts, from most to least popular, include candy, greeting cards, flowers, an evening out, jewelry, gift cards and clothing.
If your business sells popular Valentine’s Day items online, you should know a few rules related to sales tax and taxability. (Don’t forget that the ongoing boom in holiday online shopping might easily push you over a given state’s nexus threshold and create sales tax obligations.)
Some gift items are simple (at least regarding sales tax). Paper greeting cards, jewelry and many other gifts are general tangible personal property and incur sales tax accordingly.
Among other gifts with more complicated taxability rules:
Candy is taxable in most states, including several where candy is specifically excluded from the exemptions that groceries receive from sales tax. Candy may be subject to local level sales taxes, could be taxed if the same shipment includes both food/ingredients and other taxable items of tangible personal property and could avoid tax (or be taxed) depending on where or how it’s sold.
Flowers, in most states, require collection and remittance of sales tax on purchases online for delivery based on the location of florist, the customer or sometimes on the recipient.
Wine, according to The Wine Institute, incurs sales tax in all states that have a sales tax except in Kansas, Massachusetts and Rhode Island. Wine and other spirits also incur excise taxes in many states.
Dining, either in a restaurant or taking out, is taxable in most states, sometimes at a rate different from the state sales tax. This can depend on details: For example, tax in California depends on the temperature of the food. In New Mexico, the method of delivery can dictate the taxability.
Music purchased in a digital file is a digital product for sales tax purposes. Slightly more than half the states tax sales of digital products. Some have no definition of “digital” product or goods; others use the Streamlined Sales Tax definition from the Streamlined Sales Tax Governing Board.
By the way, North Carolina and Pennsylvania are among states imposing tax on sales of electronically delivered greeting cards – maybe the next frontier in sales tax and its impact on Valentine’s Day.
Sales tax compliance can seem overwhelming, but it doesn’t have to be a burden. Feel free to contact us for all your sales tax compliance needs. Want to learn more on this topic? Download our eBook The Guide to Getting Sales Tax Right.