How sales tax applies to clothing depends on where in the US you sell it. Some states—such as Minnesota and New Jersey—don’t charge sales tax on most clothing, which can attract customers and potentially boost sales for local businesses. Retailers need to carefully monitor sales tax rules for clothing to ensure they apply the correct tax rates, especially if they operate in multiple states. Incorrectly applying sales tax on clothing can lead to fines and unhappy customers.

Below, we discuss how different states tax clothing, including information about relevant tax holidays, luxury items, and online retail.

What’s in this article?

• State-specific tax exemptions for clothing
  
• Taxable vs. nontaxable clothing items
  
• Understanding sales tax holidays for clothing
  
• Luxury items and special clothing taxes
  
• Clothing sales tax for online retailers
  
• Tax considerations for clothing discounts and coupons
  
• Sales tax implications for clothing donations and returns
  

State-specific tax exemptions for clothing

Most US states have a standard sales tax rate that applies to clothing purchases, with no specific exemptions. But some states have full exemptions on certain clothing items, partial exemptions, or no exemptions. Here’s a breakdown of how different states tax clothing:

States with no sales tax

• Delaware

• Montana

• New Hampshire

• Oregon

Alaska doesn’t have a statewide sales tax, but many municipalities have low local sales taxes that apply to clothing.

States with exemptions for clothing

• Minnesota: Most clothing is exempt, except for furs, accessories, and sports or recreational equipment.

• New Jersey: Most clothing is exempt, but there are exceptions for items such as furs and accessories.

• Pennsylvania: Clothing is generally exempt, with a few exceptions for items such as fur clothing and sports equipment.

• Vermont: Clothing is generally exempt, with a few exceptions for items such as accessories and sports equipment.

States with capped exemptions for clothing

• Massachusetts: Clothing priced $175 or less per item is generally exempt.

• New York: Clothing priced under $110 per item is generally exempt.

• Rhode Island: Clothing that costs $250 or less per item is generally exempt.

Taxable vs. nontaxable clothing items

States differ when it comes to which clothing items they choose to tax. Even if a state exempts certain clothing items, its local jurisdictions (e.g., cities or counties) might have their own sales taxes that apply. That said, there are some general trends in how these items are taxed.

General principles

• Necessity vs. luxury: States with tax exemptions for clothing often distinguish between items they consider necessities (e.g., basic clothing for everyday wear) and those they consider luxuries (e.g., designer clothes, fur coats).

• Price thresholds: Some states set specific price limits for clothing exemptions, applying sales tax only to items above a certain price.

• Item category: States with tax exemptions on clothing might choose to explicitly include or exclude certain categories. For instance, athletic wear, accessories, and formal wear are exempt in some states but not in others.

Common examples of taxable clothing items

• Accessories: Items such as jewelry, handbags, nonprescription sunglasses, and hats are often considered taxable, even in states with exemptions for clothing.

• Athletic wear: While some states exempt athletic clothing, others consider specialized sports equipment (e.g., helmets, pads) or performance fabrics taxable.

• Formal wear: Tuxedos, evening gowns, and other formal attire are sometimes considered taxable, especially if they are rented.

• Fur clothing: In states where fur clothing is still legal, it is often subject to sales tax, even if other types of clothing are exempt.

• Protective gear: Items such as hard hats, safety goggles, and work gloves are generally not considered clothing and are taxable.

Common examples of nontaxable clothing items

• Basic apparel: Everyday items such as shirts, pants, dresses, skirts, underwear, socks, and shoes are typically exempt from sales tax.

• Children’s clothing: Many states exempt children’s clothing, either entirely or up to a certain price limit.

• Religious garments: Certain religious garments—such as yarmulkes and habits—are sometimes exempt for reasons of religious freedom.

• Uniforms: Work or school uniforms are often exempt, as they are considered necessary for specific purposes.

Understanding sales tax holidays for clothing

Sales tax holidays for clothing are temporary periods during which certain items—such as apparel and footwear—are exempt from state (and sometimes local) sales taxes. These holidays are designed to stimulate economic activity, help customers save money, and coincide with key shopping periods, such as back-to-school season.

States announce specific dates for their sales tax holidays, which usually last from a few days to a week, and these dates can vary from year to year and state to state. Retailers often use sales tax holidays to promote special deals and attract more customers.

Each state that participates in sales tax holidays has its own rules regarding what qualifies for exemption. Clothing items priced below a certain threshold are usually exempt from sales tax. That threshold can vary by state, ranging from $100–$500 per item.

Even during a sales tax holiday, certain items might still be taxable, such as accessories (e.g., jewelry, handbags), sports equipment, and formal wear. States might also have specific rules regarding online purchases, layaway plans, or returns during the tax holiday.

While sales tax holidays create many benefits, they also have some drawbacks:

• States lose potential tax revenue during a holiday, which can impact public services and programs.

• Retailers might incur additional administrative costs to comply with the specific rules of a tax holiday.

• Some retailers might artificially inflate prices before a holiday to offset the tax exemption.

Examples of 2025 sales tax holidays for clothing

• Alabama: July 18–20 ($100 or less per item)
  
• Arkansas: August 2–3 ($100 or less per item)
  
• Florida: July 28–August 10 ($100 or less per item)
  
• Iowa: August 1–2 ($100 or less per item)
  
• Oklahoma: August 1–3 ($100 or less per item)
  
• West Virginia: August 1–4 ($125 or less per item)
  

Luxury items and special clothing taxes

Certain clothing items might be subject to higher sales taxes. These can include luxury items or special categories such as formal wear. The taxation of these items varies between jurisdictions. However, the common principle is to tax goods that are not necessary for everyday living but that represent a choice of luxury or extravagance.

Businesses that sell luxury items or special clothing must consider the impact of higher taxes in their pricing tactics. High taxes can raise prices and potentially reduce their products’ competitiveness in certain markets. Retailers might need to readjust their market tactics to focus on customers who are less sensitive to price changes due to taxation. The need to comply with varying tax rates can also complicate inventory management, pricing adjustments, and accounting processes.

Higher taxes can deter customers from purchasing luxury items or encourage them to buy clothing in jurisdictions with lower taxes (e.g., by shopping abroad or in duty-free zones). The added cost of taxes can affect the perceived value and affordability of luxury and special clothing items and influence overall demand.

Luxury items

Luxury items typically include high-cost apparel and accessories, such as designer clothing, high-end watches, expensive jewelry, and deluxe handbags. Here are some factors that can determine what constitutes a “luxury” item:

• Price threshold: Many jurisdictions set a specific price point. Items priced above it are considered luxury and taxed at a higher rate. For instance, Connecticut applies a higher rate for clothing items that cost over $1,000 and jewelry over $5,000.

• Brand or designer label: Sometimes, the brand or designer label can classify an item as luxury. For example, goods from high-end fashion houses such as Chanel or Louis Vuitton are often automatically categorized as luxury.

• Material or composition: Items made from expensive materials—such as real fur or fine leather—can also fall into the luxury category.

Special clothing taxes

Apart from general luxury taxes, some regions impose taxes on special types of clothing, including the following:

• Fur clothing: Garments made primarily from animal fur can be subject to additional taxes due to their luxury status and environmental or ethical considerations.

• Formal wear: In some areas, formal clothing—such as evening gowns and tuxedos—might be taxed differently, especially if they are rented rather than purchased.

• Athletic or protective clothing: Although these items are often necessary for specific activities, they can be taxed differently if they are not considered basic requirements or are high-end products.

Clothing sales tax for online retailers

Online clothing retailers often need to work with multiple sets of tax rules across different states and jurisdictions. To determine their sales tax obligations, businesses must figure out whether they have nexus in a given state, which refers to a sufficient physical or economic presence.

• Physical nexus: Businesses can establish physical nexus by having physical locations, employees, warehouses, or a temporary physical presence in a state.

• Economic nexus: Many states have enacted economic nexus laws, particularly after the 2018 South Dakota v. Wayfair, Inc. Supreme Court decision. Economic nexus is based on sales revenue or transaction volume within a state. For example, generating over $100,000 in sales or conducting more than 200 transactions in a state can create economic nexus.

Online retailers must comply with the sales tax laws in each state where they have nexus. They can do so by completing the following steps:

• Registration: Retailers need to register for a sales tax permit in each state where they have established nexus.

• Collection: They must collect sales tax according to the applicable rates and rules of each state (and sometimes local jurisdictions). Businesses must be aware of which clothing items are taxable, as some states exempt certain types or have lower tax rates for basic apparel.

• Filing and remittance: Retailers must file sales tax returns and remit the collected taxes to each state where they have nexus. Filing frequencies can vary by state and often depend on sales volume.

Managing sales tax for online clothing sales presents several challenges. Tax laws and rates can change, so compliance requires continual monitoring and updates to tax collection systems. Categorizing products properly to apply the correct tax status (e.g., taxable vs. exempt) can also be difficult, especially with diverse inventory. Businesses must be transparent about the total cost of their purchases—including tax—at the time of checkout. Unexpected costs at this stage can lead to abandoned carts. Including tax in the price (i.e., tax-inclusive pricing) can simplify the checkout process but might require price adjustment to remain competitive.

Due to the challenges of managing sales tax across multiple jurisdictions, many online retailers rely on specialized software and tools, such as the following:

• Tax compliance software: Solutions such as Stripe Tax can automate the calculation and collection of sales tax. This tool integrates with ecommerce platforms and updates regularly to reflect changes in tax laws.

• Ecommerce platforms: Platforms such as Shopify, WooCommerce, and BigCommerce often have built-in features or plug-ins that help manage sales tax by automatically calculating it based on the buyer’s location.

Tax considerations for clothing discounts and coupons

Each state has its own rules regarding sales tax on discounted items. In general, online and physical store sales treat discounts and coupons the same way. However, the retailer should be aware of destination-based sales tax rules—the buyer’s location determines the applicable tax rates and rules.

Here’s how sales tax applies to clothing discounts and coupons:

Discounts

Discounts lower the sale price of clothing before sales tax applies. There are two primary types of discounts:

• Store discounts: These are reductions directly applied by the retailer at the point of sale. Sales tax is typically calculated based on the reduced price. These reductions can come in the form of percentage discounts, specific dollar amount reductions, or promotions, such as “buy one, get one free.” For the latter, some states calculate sales tax based on the full price of both items, even if one is “free,” while other states exempt the “free” item from sales tax.

• Manufacturer’s rebates: For these, the customer pays the full retail price up front and receives a rebate from the manufacturer later. In many jurisdictions, sales tax is calculated based on the full price of the item before the rebate is applied, as the rebate is considered a postsale transaction between the manufacturer and the customer.

Coupons

The tax treatment of coupons depends on whether they are store coupons or manufacturer coupons:

• Store coupons: The retailer issues these to provide an immediate reduction in the sale price before tax. As with store discounts, the sales tax is calculated based on the reduced price.

• Manufacturer coupons: When a customer uses a manufacturer coupon, the retailer normally gives them a discount, and the manufacturer then reimburses the retailer. For sales tax purposes, many states treat this scenario differently. In some places, the tax is calculated based on the original price before the coupon was applied, as the retailer is receiving the full value (i.e., sale price plus reimbursement).

Example of sales tax on discounted clothing

Assume you purchase a dress in New York City that costs $150, and you have a coupon for $25 off.

• Sales tax policy: New York exempts clothing and footwear under $110 from sales tax.

• Discounted price: The discounted price of the dress is $125.

• Sales tax calculation: Since the price exceeds the threshold, sales tax will be applied to the portion above the threshold, which is $15.

• Total price with tax: The final price you pay will include the discounted price ($125), plus the sales tax on the nonexempt portion ($15). Given that New York City has a sales tax rate of 8.875%, the total purchase price is $126.33.

Sales tax implications for clothing donations and returns

Here’s how sales tax applies to clothing donations and returns:

Donations

When businesses or individuals donate clothing, there are generally no sales tax implications because there is no sale taking place. However, they can potentially claim a tax deduction if they donate to a qualified nonprofit.

To qualify for this deduction, the donor must obtain a receipt from the charity that includes a description of the items donated and the date they were donated. The donor also has to maintain detailed records of the items, their original purchase value, and their estimated fair market value at donation. Estimating the fair market value of used clothing can be subjective and requires a reasonable assessment; in general, items should be valued at what a willing buyer would pay for them in their current condition. This value usually determines the amount of the deduction.

Returns

If a customer returns an item, the sales tax they originally paid should be refunded along with the purchase price. Many states specify a time frame within which the return must occur for the sales tax to be refundable (e.g., within 90 days of the original purchase).

Retailers should provide documentation of the return transaction that indicates the amount of sales tax being refunded. If they charge a restocking fee, the sales tax is typically refunded based on the net amount the customer receives back, not including the restocking fee. If a customer instead exchanges an item, the sales tax depends on the difference in price between the exchanged items. If the new item is less expensive, the customer should receive a refund based on the difference in sales tax; if it’s more expensive, retailers should charge them additional tax on the difference.