The weekend back-to-school shoppers have been waiting for is here: Tennessee’s annual sales tax holiday starts Friday.
Thanks to a law passed last year bumping the tax-free weekend from August to July, shoppers this weekend can save nearly 10 percent on a variety of items through midnight Sunday.
“The sales tax holiday for back-to-school items is another way to put more money back in the pockets of Tennesseans,” said Gov. Bill Haslam. “We encourage Tennesseans to take advantage of this tax break as they prepare their children for the upcoming school year.”
Taking advantage of the weekend back-to-school savings may not be as simple as it sounds, though. Not everything for sale this weekend is tax-exempt.
In general, clothing items and any school supplies (including art supplies) priced under $100 are exempt from state and local sales tax during the holiday – as are computers priced under $1,500 – but restrictions apply in each category.
For example, “clothing” is specifically defined by the state as “human wearing apparel for general use.” So while one may purchase a cozy cardigan for herself this weekend without paying sales tax on it, the one that fits the schnauzer is taxable.
Failing to meet the “general use” requirement, sports, recreational and protective equipment remains taxable. So while gloves, shoes and hats are generally tax-free, boxing gloves, ballet shoes and hard hats or helmets would be taxed.
The clothing exemption also does not apply to accessories such as handbags, jewelry, sunglasses, wallets or watches. So while a pair of pants and the belt to hold them up would be tax-free, a decorative belt buckle would be taxed; a new dress and hosiery would be tax-free, but a matching bag and earrings would be taxed.
Antique and religious clothing, aprons, shawls, bow ties, corsets, robes, vests and novelty costumes are among those clothing items that are tax-free this weekend, however, so a bit of forward-thinking could save money on Halloween costuming.
In the “school supplies” category, tax-free examples include standard items such as pencils and paper, scissors and glue, notebooks and binders, book bags and lunchboxes. Art supplies such as paints and paintbrushes, clay and glazes, drawing pads and water colors are also tax-free.
However, the school supplies exemption does not extend to reference books, instructional materials or computer supplies.
And that’s where it begins to get tricky.
On the whole, computers – desktop, laptop or tablet – priced under $1,500 are tax-exempt this weekend. But “on the whole” is the key to understanding the computer exemption.
Only preloaded software and hardware that comes bundled with a central processing unit (CPU) qualifies for tax exemption. Without a CPU, all peripheral equipment – keyboards, monitors, speakers, scanners, connection cables, printers and printer supplies – is taxable. Also taxable are computer accessories such as compact disks and flash drives.
Not to be confused with computers, electronics such as personal digital assistants (PDAs) and handheld schedulers, electronic readers (Kindle, Nook, etc.) and video game consoles are taxable.
About the holiday
According to the National Retail Federation (NRF), the back-to-school spending season is second only to Christmas for retailers. Although the NRF estimates that families with children in grades K-12 will spend roughly $668 on back-to-school supplies this year (up from around $630 last year), a 2016 Tax Foundation report found that sales tax holidays have little to do with that spending.
According to the report, tax holidays “do not promote economic growth or significantly increase consumer purchases.” Rather than spurring customers to make more or larger purchases, tax holidays simply shift the timing of purchases they already planned to make.
Of the 17 states that have implemented a tax holiday, Tennessee has the highest combined state and local tax rate. In Coffee County, the combined rate is 9.75 percent (7 percent state, 2.75 percent local). Since the holiday was created in 2006, Tennesseans have enjoyed $8-10 million in tax savings each year.
The state reimburses local governments tax revenue lost to the holiday.
Kelly Lapczynski may be reached by email at email@example.com.