Sales Tax on Clothing: Which States Require It?

The range of sales tax on clothing in the United States creates a problem for retailers and consumers. Starting in 2025, states have different policies regarding clothing sales tax, some completely exempt, some have a maximum price for exemptions, and a few have no sales tax at all. The overarching information is important for maintaining strategic pricing, compliance, and customer satisfaction.

In this comprehensive guide, we will discuss the following:

• What is clothing sales tax?
• Why is clothing taxed differently across states?
• States that require sales tax on clothing in 2025
• States that exempt clothing from sales tax
• Special clothing sales tax rules by state
• Understanding sales tax holidays for clothing
• Clothing sales tax rules for online retailers
• Tax treatment of discounts and coupons on clothing
• Sales tax implications for clothing donations and returns
• Common challenges in clothing sales tax compliance
• Best practices to manage apparel tax compliance
• How businesses can track clothing tax requirements
• Simplify your clothing sales tax with Commenda
• Key takeaways

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Now let’s dive deep.

What Is Clothing Sales Tax?

Clothing sales tax, apparel tax, tax for clothing, or clothes sales tax refers to the same tax a government places on clothing. Sales tax on clothes, shoes, and accessories charged by a local or federal government is deemed to be an indirect tax. When compared with other branches of apparel taxes levied at retail shops per county and city, the United States is individually regulated on decently administered. 

Distinguishing Sales Tax from Other Levies

Sales tax vs. VAT/GST: In contrast to VAT/GST, which is charged at every stage of production, sales tax is collected at the checkout counter by retailers. 

Sales tax versus excise tax: Excise taxes tend to be narrower in scope and focus on select goods (for example, tobacco and liquor), as opposed to sales tax, which is more general. 

Who Collects and Remits Sales Tax?

It is up to the retailers to take care of the following: 

• Registering with relevant state and local tax authorities where they have a presence. 
• Collecting the correct amount at the time of sale. 
• Submitting the collected tax by the date intervals set in the contract (monthly, quarterly, or annually). 

Not categorizing items correctly, such as removing an accessory that is taxed from the tax-free list, may result in audits, penalties, and negative customer experiences. 

Why Is Clothing Taxed Differently Across States?

Different reasons overlap to create the more complex rules around clothing sales taxes: 

Policy objectives 

• Equity and Affordability: Suggests that exempting basic apparel lowers the regressivity of sales taxes to benefit low-income households who spend a disproportionate amount of their income on essential goods. 
• Revenue generating: States balance relief with the need to pay into the general fund, and sometimes target luxury apparel to maintain revenue streams. 

Definitions of Necessity Vs. Luxury

• Essentials: Core items that get bought a lot, such as shirts, trousers, and underwear, are likely to be tax-free or taxed less. 
• Luxury goods: High-priced designer clothes, high-end accessories, and garments made from fur are likely not tax-exempt.

Administrative Simplicity

• Flat Versus Tiered Rules: Some states apply a flat rate to all clothing, which simplifies POS configuration, whereas others use tiered thresholds requiring item-level price monitoring.
• Tax holiday complexity: Seasonal exemptions intended to stimulate the economy locally increase the administrative burden for retailers who must change tax settings two times a year.

Historical & Cultural Context

• The historical reliance on sales tax (e.g., a greater reliance in southern states as opposed to an income tax in northeastern states) determines how aggressively states carve out exemptions.
• Cultural factors such as support for local agriculture shape exemptions in states like Vermont or New Hampshire.

Local Autonomy

Municipal taxes: Even in states where there is a clothing exemption, cities and counties may impose local sales tax that continues to apply to taxable items, e.g. ,accessories and high-end goods.

States That Require Sales Tax on Clothing in 2025

Below is a list of states that fully tax clothing without an exemption. In these states, the Combined rate is the state rate plus the average local rate:

• Combined rate = state + average local rate.   
• Dress and Footwear are taxed in Connecticut irrespective of the price set.  
• Hawaii’s GET is all-encompassing, encompassing all business receipts, including retail sales.  
• Massachusetts exempts clothing priced at $175 or less per item.  
• Minnesota exempts clothing under general rules; furs, accessories, and athletic equipment are taxed.  
• NH has no general sales tax; meals & rentals are taxed locally.  
• NJ exempts most clothing without a price limit.  
• NY exempts clothing & footwear under $110 per item.  
• PA exempts “clothing.” Specific definitions exclude furs & sporting goods.  
• RI exempts clothing items at $250 or less per item.  
• VT exempts clothing and excludes accessories & sports gear.  

States That Exempt Clothing from Sales Tax

The following states have not implemented a statewide sales tax, thereby liberating all clothing from sales tax:

• Delaware (0% tax)
• Montana (0%)
• New Hampshire (0%)
• Oregon (0%)
• Alaska (No state tax, but municipalities impose 1-7% taxes)

Local Variations of Taxes in Alaska

Although there is no state tax in Alaska, there are over 100 local sales taxing authorities that tend to include taxing clothing accessories or seasonal exemptions for basics and essentials.

Special Clothing Sales Tax Rules by State

Price Limit Exemptions

• Massachusetts: For lower price point clothing, each item is capped at $175 per piece, and if over the set price, taxed at 6.25%. 
• Rhode Island: Clothing caps at $250, above charged 7%, each item is exempt. 
• New York: Each piece of clothing and shoes priced below $110 is exempt, and is overcharged at 4%. 

Implementation Challenges

• Taxes must be calculated for each processed line. 
• Needs to be recalculated for tax during the initial vs the returned price. 

Seasonal Sales Tax Holidays

Typically around the beginning school holiday season: 

Key details

• Online Sales: Must go through the holiday window to qualify.
• Installment Plans: For some states, partial payment via payment plans unqualifies exemption. 
• Return: Taxes are allowed through the specified period after the return.

Accessory & Specialty Carve-Outs 

Even in exempt regions, some items continue to be liable for tax: 

Michigan and Washington: use destination-based sourcing- sales tax rate based on buyer’s address- shipping and returns as areas of compliance burden.  

Understanding Sales Tax Holidays for Clothing 

Purpose & Benefits 

• Economic Stimulus: Sustains retail visits and sales during specific intervals.
• Consumer relief: offers cost savings for low to mid-income households buying school clothes. 

Drawbacks 

• Revenue Loss: States give up millions in sales tax revenue. 
• Administrative costs: Retailers need to recalibrate tax thresholds, retrain personnel, and manage distinct returns.  
• Price manipulation: Retailers are likely to raise prices before holidays, thus reducing trust. 

Holiday Variations 

• Missouri: Exempts clothing, computers, and school supplies under $100 during the first weekend of August. 
• Georgia: no dedicated clothing holiday; supplies are managed at the behest of the district. 

Clothing Sales Tax Rules for Online Retailers

E-commerce sellers face destination-based sourcing alongside economic nexus 

Physical vs. Economic Nexus 

• Physical nexus: Having property and employees, or a warehouse in a state.
• Economic Nexus: Set thresholds, such as $100k in sales or 200 transactions, to create obligations after Wayfair (2018)

Obligations Upon Nexus

• Obtain a sales tax permit for every state you are doing business in.  
• Collect at the buyer’s place of business, considering state/local regulations on clothing.
• Remit and file by the required frequency, monthly or quarterly.

Technical Challenges

• Tax Requirement Complexity: Collection at thousands of local jurisdictions with different rules.  
• Product Categorization: Automatic mapping of SKUs to “taxable” or “exempt” categories.
• Exemption Certificate Management: For transactions that are wholesale or resale.  
• Cart Transparency: Prevention of cart exit due to tax calculation concealment.

Tax Treatment of Discounts and Coupons on Clothing

Store Discounts

• Applied Pre-Tax: Sales Tax is calculated off the discounted price.  
• BOGO: Some states tax both full-priced and no-priced items, while others don’t charge tax on free items.

Coupon Manufacturer

• Tax Based on Full Price: For many states, tax is calculated from the retail price before the coupon because the retailer is reimbursed by the manufacturer, which is not included in the calculation.

Example (New York City)

• The dress has a retail price of $150 and a store coupon valid for $25, resulting in a price of $125. 
• Exemption of $110 tax with a total of taxable $15 (8.875% = $1.33 tax, total $126.33), allowing the first portion.

Sales Tax Implications for Clothing Donations and Returns

Donations

• There are no consequences, donors can claim a deduction for taxes through documentation proof.  
• Required paperwork with proof of transaction for greater than $500.

Returns & Exchanges

• Refunds: The retailer will refund the original tax if the item is returned within the state-designated return period.
• Restocking Fees: Tax refund applies to the net return amount.
• Exchanges: Additional tax due if the new item is more expensive; refund tax difference if cheaper.

Common Challenges with Clothing Sales Tax Compliance

Multi-State Nexus Complexity

Economics nexus (ex, $100,000 in sales or 200 transactions) incurs remote seller responsibilities after Wayfair.

Product Classification Ambiguity

Defining “clothing” for “accessories” or “protective gear” requires careful mapping by SKU.

Enforcement of the Price Thresholds

Rebate states require item-level price scanning during checkout, which complicates discounts, promotions, bundling, and cross-selling.

Tax Holiday Administration

Staff training, point of sale reconfiguration, and returns handling policy are needed when rules change.

Bookkeeping For Exchanges, Returns, and Other Transactions

Requires tax refund alignment with state timelines for returned items (or tax differential on exchanges).

Online Sales Notifications

Dynamic tax indicators have to be incorporated to reflect new local rules on e-commerce sites and changes in local regulations.

Best Practices to Manage Apparel Tax Compliance

• Apply Tax Computer Systems: Commenda’s tax engine is a software solutions that require merchants to change rates and rules frequently.
• Consolidate Exemption Certificates: Put resale exemption certificates with auto-reminders into a digital format.
• Prepare Employees for Tax-Free Days: Rehearse the issued POS configuration and customer instructions for these events.
• Conduct a Compliance Audit Review: Quarterly reviews lessen the chance of classification or rate application mistakes.  
• Store Information Correctly: Transaction logs, exemption certificates, and audit trails are vital to escaping sanctions.  

How Businesses Can Track Clothing Tax Requirements

• Department of Revenue for Each State  

Bookmark each state’s Department of Revenue website for clothing tax bulletins and legislative updates.  

• Subscription to Tax Newsletters

Commenda’s updates are examples of helpful industry sources that offer newsletters. The streamlined Sales Tax Governing Board also provides newsletters.  

• Regular Compliance Audits

Conduct quarterly internal audits of sales tax filings to catch misclassifications or missed exemptions.  

• E-commerce Platform Integrations

Use the Application Programming Interfaces (APIs) of Shopify, Magento, and BigCommerce. Their e-commerce tax-synced engines are beneficial.  

• Professional Partnerships

Work with tax advisors and Commenda, a compliance service for multi-state registration, return, and nexus analysis, to outsource them.  

Simplify Your Clothing Sales Tax Compliance with Commenda

Sales tax on clothing becomes complicated by the state, but is made simple by Commenda. Their solutions contain:  

Filing and registering of sales tax for clothing: We file returns on behalf of our clients by additional jurisdiction registration when they have nexus. Commenda also registers businesses.  

Automated Rate Updates: With every POS and e-commerce platform integration, our tax engine mechanizes rate updates for accurate application every time, and thousands of localities.

Exemption & Certificate Management: We take the hassle of audit risk away from you by managing and automating the entire process of collecting and renewing certificates.

Holiday & Threshold Tracking: Our team automatically adjusts your settings and monitors any changes to seasonal tax holidays and thresholds.

Dedicated Support: Our sales tax experts are available at any time to assist.

Relieve yourself from tax worries and grow your brand with Commenda’s effortless tax compliance for apparel. Reach out to us for a tailored demo.‍