America is one of the best places to buy clothes, electronics, etc. You get the best value for your money spent. If you are a tourist from Asia or Europe, you will see prices much cheaper in US, if you buy in outlet malls. Many are not aware that you may be able to get tax refunds as tourist, if you buy in some states like Texas in US. In this article, we will cover all the details on how to get tax refunds, what are the requirements and conditions, and address some commonly asked FAQs.
Do you get Tax Refund for Shopping in US at Malls or Online Stores ?
It totally depends on the state you do shopping. If you shop in certain states like Texas, you are very likely to get tax refund for your purchases in US as a tourist. There is no published list by US Govt or US Tourism website that says that you get Tax Refund, if you buy things in a certain state.
It is not very clear, if you would get a tax refund, if you buy stuff online. You need to check with the online retailer on this as this totally depends on where you ship your goods and how the seller will charge you state tax. Also, even if you get the refund, there are way too many conditions to get a decent refund back to you. We will look at them in later sections.
Tax Refund : State Sales Tax vs. Federal Sales Tax ?
In America, there is no Federal Sales Tax ( national level sales tax). When you buy goods in US, the respective State or Local Government charges you State Sales Tax. The federal govt, usually imposes customs duty or tariffs on federal level.
The sales tax you pay for shopping in US goes to the respective state govt. or local govt and does not go to the federal government. So, you usually get the State Sales Tax or Local Govt. sales tax as refund, if you are exporting the goods outside of US. Below is an image that shows approximate State tax by state for your reference.
As you would usually get the State Tax as refund, it is worth for you to review the respective tax you paid for you to get an estimates. You can see that in the purchase receipt. There will be a section that clearly tells as Sales Tax. That is nothing but the State Sales Tax. Below is sample purchase in Houston, Texas. You can see the Sales Tax highlighted to get an idea.
Requirements to get Tax Refund in USA as Tourist or Resident
The requirements to get tax refund vary by state and are slightly tricky to get a decent refund, as they force you to purchase more at a single store. Most of the requirements or conditions are common for foreigners and US Citizens, only difference is where they can claim tax refund and when. Below are the requirements.
- Minimum Amount : Depending on the state, there is a minimum amount of tax you need to have per receipt or purchase from a brand store or outlet store. In Texas, you need to have a minimum of $12 tax per receipt or combined receipts from the same brand stores. Technically, in Texas with 8.25% sales tax, you need to purchase for at least for $150 USD in a single store or brand outlet to be eligible for the refund.
- Original Receipts : You need to submit original receipts at the Tax refund counter. They do not accept duplicate, photo copy or reprint sales receipts. You need to submit the first original receipt that is printed. No digital or e-mail receipts are accepted, unless it is an online purchase item from a brand store and if the receipt has delivery address of the goods in that state. You need the packaging slip of delivery for online purchases.
- 30 days : You need to have the purchase done within 30 days from the day of your international travel or departure date from US.
- International Travel : You get refund only, if you are traveling outside of US and the items you are buying will be staying outside of US. Technically exporting it to other country, that’s why they ask for the original receipt and take it for refund. It means that the sale is final in US and there are no returns for your same goods you bought here in US.
- Physical Inspection : You need to show your item purchased for physical inspection and it has to be in new and unused condition with all the tags.
- Passport , I-94 / Entry Stamp : You need to show your Visa/ Passport, and I-94 with entry stamp on it, if holding foreign passport.
- Departure Information / Flight Tickets : You need to show your international departure info or flight ticket itinerary and for US citizens, you need to show the boarding pass to get tax refund.
- Item should Depart US & State : The items purchased must be taken with you and should depart the state you purchased in and USA as well.
- Food or Services : No refund for food or services purchased.
- Participating Stores : You get Tax Refund only if you purchase goods from the participating stores. They claim that it is a big list of 6,500+ stores…but watch out for the brands. I purchased from few brands, that were not eligible for refund such as Abercrombie & Fitch.
- Processing Fee : There is a processing fee for your tax and it is crazy. Below are the options
- Instant Cash : If you want instant cash it is 50% processing fee for tax refund.
- Check / PayPal : If you want a check or can get refund to PayPal, then it is 35% of the tax refund. Also, you will also be charged $4 USD for every single store or brand purchases.
- Refund Locations : Both US Citizens and non-US citizens can claim tax refund at all major international airport terminals, they would have a Tax refund desk. Check airport for the details on the terminal. Also, if you are a non-US citizen, then you can even claim tax refund at certain mall locations in the state. Check the state website for the exact locations in a For Texas, here are the refund locations.
- Tax Refund Policies : Tax refund policies can vary by state and there is no standard sales tax percentage set as well. You should check the Sales Tax and Tax Refund policies in that respective state before you shop to ensure you get tax refund. For instance, if you shop in Delaware, there is no sales tax, so no refund. For policies in Texas, check out Requirements for Sales Tax Refund in Texas
Tips for Tax Refund as Tourist or Resident in US
Overall, Tax refund is definitely a good thing, if you are doing a lot of shopping and taking it home. The only downside is that you have to give the original receipt of purchase. I bought for over $900 USD, but could not get a sizable tax refund as I did not know all of these facts and conditions. If you plan it ahead of time, you maybe able to get a decent tax refund. Below are some tips
- Duplicate Receipt / re-prints : When you buy your item, request for duplicate receipt or re-print of receipt. This can be used by you for warranty at your home country or international location.
- Take a Photo of Original Receipt : Take a picture of the original receipt and if requested by the warranty location outside of US, then you can use the photo and duplicate receipt.
- Buy maximum at One Brand Store : Make sure you pick few brands and do shopping in those brands, so that you meet the minimum requirement of Tax refund. If not, you will not be eligible for tax refund as you will miss out on the minimum. I did not get anything as I bought in multiple brands and they were less than $150 purchase per store, so I was not meeting the minimum amount of tax refund in Texas.
- Register for Warranty : If you are buying an electronic item and if there is an option to register online, register for warranty, when you have the original receipt.
We have address some of the commonly asked questions below.
The tax refunds, if given in a certain state, are paid by the respective State Govt. or local Govt. where you made the purchases in. It is a state tax refund and not a federal govt refund. Also, there is no IRS involved here.
Yes, it does not matter. All visa types are eligible. Anyone traveling outside of US are eligible for tax refund. All the tax refund conditions described in above article apply to everyone.
Yes, US Citizens are also eligible for tax refund, provided they travel outside of US within 30 days. You can only claim it at airports on the day of your departure. All the conditions and requirements are described in above article
When you shop in America, you are not subject to Value Added Tax (VAT) or Goods and Services Tax (GST). The concept of VAT and GST exist in many countries by US is different and you are only subject to Sales Tax, when you do shopping.
What are your experiences with Tax Refund as Tourist ? Did you get any tax refund as Resident ? Share your thoughts in comments.
Image Credit : https://files.taxfoundation.org/20180212171639/LOST2018.png