Clothing Tax – A State-by-State Guide
Sales tax on clothes varies significantly between states, with different tax rates, tax holidays, and general regulations on the level at which clothing is taxed. In some states, clothing is completely tax-exempt, while in others there are luxury thresholds at which clothing becomes taxable. In this guide, we’ll take a closer look at these thresholds and rules across different states.
For online retailers who sell clothing to different states, it is important to know at what level sales tax on shoes and clothes kick in.
Sales Tax on Clothing By State
Forty-six states now have some form of economic nexus law requiring out-of-state sellers to collect and remit sales tax on a certain volume of sales. Because sales tax on clothing is a unique situation that does not always match broader sales tax regulations, it’s important to know which states exempt clothing, which do not, and what applies.
Why is clothing different from other Tangible Personal Property (TPP)?
In most states, sales tax rates are determined by the definition of Tangible Personal Property, but clothing is unique. In four states, it is completely tax-exempt and in eight additional states, there is a partial exemption on sales tax on clothes. Adding more variables to the mix, there are several states in which tax holidays change from year to year, often coinciding with back-to-school or end-of-the-year holiday shopping seasons.
So when should you collect sales tax on clothes and shoes? Here’s a breakdown of state tax rates and requirements for clothing:
States with No Clothing Tax
The only places in the United States, where clothing is completely exempt, are the four states in which there is no sales tax at all: Delaware, Montana, New Hampshire, and Oregon.
States with Limited Clothing Tax Exemptions
There are eight states in which only some clothing purchases are exempt from sales tax. These include:
Alaska doesn’t have a statewide sales tax but does have municipal sales taxes in most of its local governments, meaning that in locations with a local sales tax, clothing is subject to normal sales taxes.
Massachusetts offers a limit for clothing exemptions. While all forms of athletic apparel and protective gear, and most accessories are taxable, standard clothing and shoes are tax-exempt up to $175 per item. Items that cost more than $175 are subject to tax.
Minnesota offers a blanket exemption for all clothing, except for clothing accessories, any type of fur clothing, sports apparel and equipment, and protective equipment and clothing.
New Jersey’s sales tax guidelines are similar to Minnesota in that all items are exempt regardless of cost except for equipment, accessories, any type of fur clothing, and sporting equipment or gear.
New York State’s apparel tax laws are a bit more complicated than the other partially exempt states. Like Massachusetts, New York and New York City offer exemptions for most clothing items up to $110. Anything above this amount is considered a luxury item. In addition, however, state sales taxes don’t apply to athletic equipment, any item or apparel used to repair or make apparel that is otherwise exempt, and any costumes or formal wear when rented.
The above exemptions apply to all state sales taxes, but not all local taxes. The following counties do offer local exemptions:
- Chautauqua County
- Chenango County
- Columbia County
- Delaware County
- Greene County
- Hamilton County
- Tioga County
- Wayne County
- New York City
The state of Pennsylvania exempts all clothing sales from sales tax except for formal wear, sporting equipment, and anything made with or in imitation of fur.
Rhode Island has a similar exemption cap to New York and Massachusetts, though, it is much higher at $250 per item. In addition, Rhode Island’s cap is different in that the tax levied only applies to the total amount paid above the $250 cap per item. So a $500 suit jacket, for example, would be taxed only on the $250 over the $250 cap. Other items that are taxable include protective equipment, sporting equipment and apparel, and costume masks.
Vermont offers a blanket exemption for clothing sales, with the exception of sporting equipment and apparel, protective equipment, and accessories.
States Offering Sales Tax Holidays on Apparel
While no other states offer broad exemptions from sales tax on clothing and footwear, there are 15 states in which sales tax holidays are observed for several weeks each year. These include:
- New Mexico
- South Carolina
Sales tax holidays can change from year to year, both in duration and the amount that can be exempted when purchasing clothing. It’s best to check with individual state tax authorities to determine when sales tax holidays apply.
If you sell clothing and apparel, make sure you understand how these rules affect you and your customers. If you need consulting help or wish to outsource your tax compliance efforts, you can contact us at 866-400-2444. Our focus on small business, along with our attention to detail and accuracy related to the tax data and services we provide, can help save you money in the long run.