| (g) Buy one, get one free or for a reduced price. The
total price of items that are 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 under this section. 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 $120; the second pair
of pants is free. Tax is due on $120. Having advertised that the second
pair is free, the store cannot register the charge for each pair of
pants at $60 in order for the items to qualify for the exemption.
However, if the retailer advertises and sells the pants for 50% off,
and sells each pair of $120 pants for $60, 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 that
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 $100; the second pair is sold for $50 (half price).
Tax is due on the $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 $75 in order for the items to qualify for the exemption
under this section. However, if the retailer advertises the shoes
for 25% off, and thereby sells each pair of $100 shoes for $75, then
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 merchandise. An order is accepted for layaway by the retailer
when the retailer removes the goods from normal inventory or clearly
identifies the items as sold to the customer. The sale of an eligible
item under a layaway plan qualifies for exemption when either:
(1) final payment on a layaway order is made by, and
the merchandise is given to, the customer during the exemption period;
or
(2) the customer selects the eligible item and the
retailer accepts the order for the item during the exemption period,
for immediate delivery upon full payment, even if delivery is made
after the exemption period.
(j) Rain checks. Eligible items that customers purchase
during the exemption period with use of 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 eligible item during
the exemption period, but later exchanges the item for an item of
a different size, different color, or other feature, no additional
tax is due even if the exchange is made after the exemption period.
(2) If a customer purchases an eligible item during
the exemption period, but after the exemption period has ended, the
customer returns the item and receives credit on the purchase of a
different item, the appropriate sales tax is due on the sale of the
newly purchased item.
(3) If a customer purchases an eligible item before
the exemption period, but during the exemption period the customer
returns the item and receives credit on the purchase of a different
eligible item, no sales tax is due on the sale of the new item if
the new item is purchased during the exemption period.
(4) Examples:
(A) A customer purchases a $35 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 $35
price of the shirt.
(B) A customer purchases a $35 shirt during the exemption
period. After the exemption period, the customer exchanges the shirt
for a $35 jacket. Because the jacket was not purchased during the
exemption period, tax is due on the $35 price of the jacket.
(C) During the exemption period, a customer purchases
a $90 dress that qualifies for the exemption. Later, during the exemption
period, the customer exchanges the $90 dress for a $150 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.
(l) Returned merchandise. For a 30-day period after
the temporary exemption period, when a customer returns an item that
would qualify for the exemption, no credit for or refund of sales
tax shall be given unless the customer provides a receipt or invoice
that shows tax was paid, or the retailer has sufficient documentation
to show that tax was paid on the specific item. This 30-day period
is set solely for the purpose of designating a time period during
which the customer must provide documentation that shows that sales
tax was paid on returned merchandise. The 30-day period is not intended
to change a retailer's policy on the time period during which the
retailer will accept returns.
(m) Mail, telephone, e-mail, 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 eligible item 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 customer orders and pays for the item and the
retailer accepts the order during the exemption period for immediate
shipment, even if delivery is made after the exemption period. The
retailer accepts an order when the retailer has taken action to fill
the order for immediate shipment. Actions to fill an order include
placement of an "in date" stamp on a mail order, or assignment of
an "order number" to a telephone order. 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 company.
(n) Shipping and handling charges.
(1) Shipping and handling charges are included as part
of the sales price of an eligible item, regardless of whether the
charges are 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 $5.00. The sales price
of the jacket is $100. Tax is due on the full sales price.
(B) A customer orders a suit for $285 and a shirt for
$95. The charge to deliver the items is $15. The $15 shipping charge
must be proportionately and separately allocated between the items:
$285 / $380 = 75%; therefore, 75% of the $15 shipping charge, or $11.25,
must be allocated to the suit, and separately identified on the invoice
as such. The remaining 25% of the $15 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 plus $3.75, which totals
$98.75; therefore, the shirt qualifies for the exemption.
(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, which totals
$100; because the sales price of the shirt exceeds $99.99, the purchase
of the shirt is taxable.
Cont'd... |
