Retailers are hoping to entice back-to-school shoppers this summer, thanks to sales tax holidays in states around the country, in an effort to fend off online merchants that are causing many brick-and-mortar stores to go out of business.
The tax embargoes remain popular with consumers, even though some states such as Massachusetts have dropped their sales tax holidays in recent years (see Sales tax holidays may be going away).
“Massachusetts has dropped theirs, and then Georgia attempted to drop theirs, but enough of their constituents complained about it that they did pick that back up,” said Sonya Daniels, a state and local tax manager at CBIZ MHM. “Georgia is going to offer it, but they are looking at the cost and they were hard pressed to offer it.”
No new states have eliminated their sales tax holidays this year, although some have debated the issue. “Louisiana looked at it really hard this year,” said Daniels.
Other states that have dropped it in the past, such as North Carolina, again considered reinstating a sales tax holiday, but eventually decided they needed the extra revenue.
“North Carolina continues to look at it each year, but still has not picked it back up,” said Daniels. “It’s still not being picked up in states that have dropped it in the past. There’s still a cost there that states are seeing that hurts them.”
On the other hand, several states are heavily promoting their sales tax holidays, much to the relief of retailers.
“A lot of the states are promoting it,” said Daniels. “You’re seeing some of the main ones that like it are Arkansas, Indiana, Texas, Tennessee, Maryland, Connecticut, Florida, Mississippi and New Mexico.”
Besides promoting back-to-school sales on items like clothing and school supplies, some states are offering sales tax holidays on other types of items such as Energy Star-rated appliances that use electricity efficiently, particularly in states that have seen heavy damage from severe weather.
Another trend has been “Second Amendment sales tax holidays” on items such as guns, ammunition and hunting supplies. “Some of the states, especially in the South, are starting to pick up on that,” said Daniels. “Tennessee is looking at that. You’ve seen Louisiana and Arkansas pick that up.”
Most of the sales tax holidays occur in late summer right before the school year begins, but some states are experimenting with other times of year.
“A couple of the states added one mid-year to try to entice parents during that growth spurt where kids might need new winter clothes,” said Daniels. “I did see that happen in Iowa and other states where there is a drastic change in the weather, where they added one in February. That was a little different, but for the most part it stayed consistent. Tennessee did back theirs up a week. Parents were complaining that they were running that a little late before school was starting so they backed it up to the last week of July as opposed to early August.”
Most of the back-to-school sales tax holidays are limited to clothing and school supplies under $100, although the amount may be higher for more expensive items such as computers, where the exemption amount can be as high as $1,500. One state, Missouri, is allowing students to buy “graphing calculators” for up to $150 tax-free. For those students who still use calculators, that is.
“I was surprised the kids still need those,” said Daniels.
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