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Graduation Caps and Gowns May be Tax Exempt…In Some States

According to a recent study by the OECD, American students and their families are responsible for 46 percent of the cost of postsecondary education (i.e., colleges, universities, trade schools), compared to 26 percent for those living in Canada. A recent SALT Talk blog suggests this is why certain states have decided not to collect sales tax on caps and gowns.

States differ on whether graduation caps and gowns qualify for an exemption as clothing. New York exempts the graduation garb purchased for less than $110. However, Pennsylvania only exempts clothing that are not accessories, ornamental wear, formal day or evening apparel, articles made of fur or sporting clothes. The state does not exempt graduation caps and gowns, presumably because they constitute ornamental wear or formal wear.

Read more about whether caps and gowns fall within the Streamlined Sales Tax definition of “clothing” here.

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