SALES TAX SLICE: PARADES, BBQS, AND SPECTATOR SPORTS - LABOR DAY’S TAXING OPPORTUNITIES

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Labor Day marks the nation’s annual “tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” The quote is from the U.S. Department of Labor’s website, which provides a surprisingly interesting history of why we celebrate the first Monday of September. Oddly enough, our modern celebration of the holiday with local parades, end-of-summer barbecues, discount shopping and spectator sports, is not too far afield of the first Labor Day celebration. The very first Labor Day celebrated in New York City in 1882 kicked off with a parade of 10,000 to 20,000 working men and women and their families, including a marching band, and ended with a party—complete with speeches, food, cigar-smoking and plenty of kegs of beer—that lasted late into the evening. By the time it became a federal holiday in 1894, Labor Day had been adopted by more than half the states.

All of this history pre-dates states’ enactment of broad-based, general sales taxes, of course. But, the celebration of the American worker would eventually become one of the best opportunities for states to generate sales tax revenue. Labor Day, apparently, is the biggest shopping holiday next to Black Friday, the day after Thanksgiving.

These days, our three-day weekend celebration likely consists of sitting with friends around an open-pit barbecue grill, making last-minute bargain purchases or eagerly anticipating the fourth quarter outcome of our favorite college football rivalry. The obvious sales tax connection here is the tax revenue generated by the boost in shopping over the three-day weekend. There are, however, more discreet Labor Day tax issues to consider.

For instance, if you decide to have your holiday groceries, or even your new propane grill tank, delivered to your door, instead of fighting the crowds at the store, you might owe sales tax on the convenience of home delivery. In some states, like California and Maryland, a delivery charge that is separately stated on the invoice is not subject to tax. In Connecticut, Indiana, Kansas or Maine that delivery charge is taxable whether it’s stated as a separate item or not. And even in California, if the propane vendor, for example, delivers your grill tank in its own truck, the cost of the delivery will be included in the taxable sales price.

If your Labor Day celebration includes attending the opening game of the local college football season, you can buy your tickets tax-free in a majority of states. In many states, tickets sold for athletic events held by both public and private schools and colleges are not taxed. But, states like Georgia and Kansas do impose tax on admissions to school athletic events. Public and private schools in Alabama are required to collect tax on admissions to their athletic events, but public schools can keep the tax money collected as long as the funds are used for school purposes.

Oh, and what about parades? Well, Louisiana used to allow nonprofits to buy specialty items for Mardi Gras parades tax-free; that is, until the state made recent sales tax changes to try close a big budget gap. The Mardi Gras exemption gets reinstated in 2018. Sorry Labor Day parades.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What might the public policy reasons be for taxing delivery charges? Are states that do not tax admissions to college athletic events giving up a significant source of revenue?

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By René Y. Blocker