A tax holiday is a time period during which some items are sold tax-free or partially tax-free. For example, during a tax holiday, customers may be able to purchase outdoor recreation items or school supplies and not pay sales tax. Or customers may be able to purchase some more expensive items, such as a $400 bicycle, but only pay tax on the amount over $250.
The Tax Holiday feature allows stores to easily apply these discounts at checkout and track the tax holiday amounts using the Comparative Revenue Report and the Sale Tax Details Report.
Note: This feature is not supported for stores that use our Avalara AvaTax™ integration,
This KBA has these procedures:
- How to sell a tax holiday item
- How to return a tax holiday item
- How to access tax holiday accounting totals
- How to turn the tax holiday feature on and off
How to sell a tax holiday item
- Add the tax holiday item to the invoice.
- Right-click the item and select Tax Holiday or select the item and press Ctrl + T.
- In the Apply Tax Holiday window, enter the amount that is tax free during the tax holiday. If the line item quantity is greater than one (1), you must enter the tax free amount for the full quantity.
- A customer purchases a bicycle for $400 and the first $250 is tax free.: Enter 250 as the tax free amount.
- A customer purchases one pack of AAA batteries for $5 and batteries are tax-free during the holiday: Enter $5 as tax free amount.
- A customer purchases two coolers for $100/each and the first $75 of each cooler price is tax free. The cashier scans a cooler and enters 2 for the line item quantity: Enter $150 as the tax free amount (2 x $75).
- Click Apply or press F8 and two new line items will appear.
- TAX HOLIDAY 1: TAX HOLIDAY 1 (Credit SKU): This taxable credit removes the sales tax for the tax-free amount.
- TAX HOLIDAY 2: TAX HOLIDAY 2 (NontaxableSKU): This non-taxable line item adds back the tax-free amount without incurring any sales tax.
The Tax Holiday line items reduce the sales tax while preserving the original sales price.
- Add any other purchase items and complete the sale.
- The Tax Holiday 1 and Tax Holiday 2 line items cannot be edited directly. To change the Tax Holiday amount for an item, right-click the item, select Tax Holiday (or press Ctrl + T) , and update the amount.
- If you enter or scan a tax holiday item and it is auto-combined with a previous line item earlier on the invoice, you must update the tax holiday amount on the original line item to reflect the new quantity.
- Tip If desired, you can ask Paladin Support to turn off the auto-combine feature for your store.
- If you delete a tax holiday item from the invoice, the Tax Holiday 1 and Tax Holiday 2 line items are also removed.
- Although they appear on the invoice as part numbers, Tax Holiday 1 and Tax Holiday 2 are not accessible from the Inventory module. For tax holiday accounting totals and details, use the Comparative Revenue Report and the Sale Tax Details Report (see How to access tax holiday accounting totals).
- Tax Holiday adjustments (Tax Holiday 1 and Tax Holiday 2 line items) are not saved when you use the Store Transaction feature to save quotes, on hold invoices, orders or to temporarily suspend a transaction.
How to return a tax holiday item
Note: The Tax Holiday feature must be enabled to calculate the correct tax refund for a tax holiday return.
- Open the Invoice/Quote module.
- Click Advanced Lookup or press F1, click the History tab, and then scan or enter the invoice number to show the original invoice items. Enter negative quantities for the returned items, and the click Add Items to Invoice or press F8.
Note: If you don’t have the invoice, you can enter the return items to the invoice manually.
- For each tax holiday item, right-click the line item, select Tax Holiday and then enter the line item amount that was not taxed on the original sale.
Caution: If the returned quantity is not the same as the original purchase quantity, the Tax Holiday 1 and Tax Holiday 2 amounts will not be the same as shown on the original invoice. Make sure you enter the correct non-tax sale amount for the return quantity.
Click Apply or press F8 to add the Tax Holiday 1 and Tax Holiday 2 line items to correct for the tax holiday discount:
- Process the return.
How to access tax holiday accounting totals
The Comparative Revenue Report and the Sales Tax Details Report provide tax holiday accounting totals.
Tax Holiday totals in the Comparative Revenue Report
The Comparative Revenue Report provides a breakdown of the tax holiday totals using the following two departments:
- Department 20010: Tax Holiday – Taxable: Total of the Tax Holiday 1 line item negative extension values (credits) that removed the sales tax for the tax-free amount of the sales price..
- Department 20011: Tax Holiday – Nontaxable: Total of the Tax Holiday 2 line item extension values that added back the non-tax portion of the sales price as a non-taxable line item.
The Comparative Revenue Report can be found in the Reports module under Sales Analysis > Revenue.
Tax Holiday details in the Sales Tax Detail Report
The Sales Tax Detail Report provides a line-by-line accounting of the sales tax charges and credits during the Tax Holiday for each tax holiday item.
The Sales Tax Detail Report can be found in the Reports module under Sales Analysis > What I Need To Know.
How to turn the sales tax holiday feature on and off
It is your choice whether to turn this feature off when there is no tax holiday. However, if you do turn it off, you may want to keep it on for a while after the tax holiday ends in order to process any tax holiday returns.
- On the File menu, click Setup.
- Click the Invoice (Store) tab.
- Look for this setting: Enable Tax Holiday
- To turn off this feature, clear this checkbox.
- To turn on this feature, select this checkbox.
- Click Save and close the Paladin Configuration window.
- Restart Paladin.
If you have questions or suggestions about this information, contact firstname.lastname@example.org.