NOTICE TO DISTRICT RETAILERS

July 6, 2001 District Repeals Snack Tax, Offers Sales Tax Holiday WASHINGTON, DC - The tax on snack food sold in the District of Columbia is now repealed. The "Tax Clarity Act of 2000," which became effective June 9, 2001, eliminates the 5.75% sales tax on all sizes of snack food items. The snack food tax repeal applies only to the 5.75% sales tax for products sold at grocery and convenience store-type operations. This repeal does not affect food sold by restaurants, lunch counters, vending machines, cafeterias, caterers, boarding houses, hotels, or like places of business. What is a "snack"? The District also will offer a "Sales Tax Holiday" from August 3 through August 12, 2001. The Sales Tax Holiday provides for an exemption from the 5.75% sales tax for footwear, clothing and school supplies, each item less than $101.00, purchased during the tax holiday period. The 10-day break from the District's sales tax, timed to coincide with the traditional back-to-school shopping period, will begin on Friday, August 3, 2001, and end at midnight on Sunday, August 12, 2001. During that time, the District's sales tax will not be charged on merchandise frequently purchased during the back-to-school period if the items are priced at less than $101.00. The items include clothing, footwear and school supplies. The sales tax exemption will apply regardless of how many items are sold on the same invoice to a customer. What is considered "clothing"? "school supplies"? Snack Chart What is a "snack"? A snack is a food not intended for immediate consumption, and sold suitable for consumption without further processing such as heating, cooking, or thawing. Snack foods include, but are not limited to: Potato chips and sticks; pretzels; cookies; packaged popped corn; pork rinds; cheese puffs and curls; packaged ice cream less than one pint; crackers; fabricated snacks; snack cakes and pies (donuts, cake and pie slices, and other pastries that are baked or fried in, or sliced into, individual serving sizes); candy; chewing gum; nuts and edible seeds; marshmallows; mixtures that contain one or more snack foods; fruit or vegetable drinks that contain less than 15% natural fruit or vegetable juice by volume, and bottled and canned soft drinks. The following food items are "for immediate consumption" and were not subject to the snack tax: All food and drink served or sold in or by restaurants, lunch counters, vending machines, cafeterias, caterers, boarding houses, hotels, or like places of business. Such foods include, but are not limited to, lunch counter items or food to be eaten in the store; any non-food items; hot foods that are ready to eat; any food marketed to be heated in the store, and cold drinks served in a cup or glass dispensed by a retailer or on a self-serve basis. Clothing Chart What is considered "clothing"? "Clothing" means an article of apparel for humans, including: pants, shirts and blouses, dresses, coats and jackets, belts, hats, undergarments, multiple piece garments sold as a set, shoes, boots, athletic shoes, socks, and stockings. What are "school supplies"? "School supplies" means items purchased for use in the classroom, at home, or for any school activity, including: pens, pencils, stationery, book bags, lunchboxes, calculators, and notebooks. The exemption does not apply to: Skis, swim fins, roller blades, and skates; exempt items normally sold as a unit with nonexempt items, if the items are separated; items advertised as "buy one, get one free" or "buy one, get one for a reduced price" if one or both items are averaged to qualify for the exemption; items whose prices are reduced by a manufacturer's coupon to qualify for the exemption; repairs and alterations; items for rent; and items sold in public lodging establishments.