When Prime Minister Justin Trudeau gave NYU’s commencement speech on May 16, he made no mention of the disparity in tuition costs between Canadian and American colleges. According to a recent study, while public expenditure in the United States on primary and secondary education is comparable to that in Canada, American students and their families bear 46 percent of the cost of tertiary education, compared with 26 percent borne by their Canadian counterparts. Perhaps this is why certain states have decided to throw students a bone on one of their final collegiate expenses: their caps and gowns.
States differ on whether graduation caps and gowns qualify for exemption as clothing. For example, New York exempts as clothing graduation caps and gowns purchased for less than $110. Pennsylvania exempts clothing other than accessories, ornamental wear, formal day or evening apparel, articles made of fur, and sporting goods and clothing. The Commonwealth takes the position that graduation caps and gowns do not qualify for this exemption, presumably because they constitute disqualified ornamental wear or formal wear.
Connecticut—home to Yale University, where Hillary Clinton will give a commencement speech on Sunday—previously exempted graduation caps and gowns as clothing when purchased for less than $50. However, effective July 1, 2011, Connecticut repealed its perennial exemption for clothing, and it now only exempts clothing when purchased during its August back-to-school sales tax holiday. This would appear to be of little avail to students who fail to plan ahead. Nonetheless, several states, including Texas, South Carolina, New Mexico, and Florida specify that purchases of graduation caps and gowns qualify for their back-to-school tax holiday occurring at the end of the summer.
Do caps and gowns fall within the Streamlined Sales Tax definition of “clothing”? Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn.
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