State Tax Holidays Offer Back-to-School Relief

As the end of summer approaches, many brick-and-mortar businesses look forward to the back-to-school shopping season and its potential for increasing traffic at their locations. A number of state governments are trying to help promote these sales and level the playing field with online retailers (which don't always charge sales tax on all Internet purchases).

Back-to-school shopping will be tax-free on various dates this July and August in 16 states, according to CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services. During these "tax holidays," back-to-school items such as clothing, footwear, school supplies, computers and, in a few states, many other items, may be purchased free of state sales tax. Local sales taxes may continue to be imposed in some places, however.

"Despite serious budget constraints, most states are reluctant to cancel their tax holidays," said Carol Kokinis-Graves, JD, CCH Senior State Tax Analyst

Merchants would be wise to take advantage of these tax holidays and promote them in their advertising and promotions. But you must be aware of the opportunity in order to take advantage of it. Below, we have compiled a list of states that offer these sales tax holidays. If you have concerns about your business obligations under these holidays, check with your state department of revenue - they will have materials to guide you through your state's requirements.

This year, three states - Florida, Illinois and Maryland - have joined the ranks of states offering a tax holiday timed for back-to-school purchases. In Massachusetts, a back-to-school tax holiday bill has passed the House of Representatives but has not yet been enacted. Only two states that offered tax holidays for back-to-school purchases in 2009 - Georgia and Vermont - have not continued them for this year. However, Vermont did offer a tax holiday earlier in the year.

2010 Back-to-School Holidays

Holidays timed for back-to-school shopping begin as early as July 30 this year. While some limit the exemption to clothes and shoes, others extend exemptions to a wide range of personal items. All place dollar limits on the amount exempt from sales tax, from as little as $10 for school supplies in Florida to as much as $3,500 for computers and computer peripherals in Missouri.

Alabama: On August 6-8, the following are exempt:

• clothing with a sales price of $100 or less per item;
• single purchases, with a sales price of $750 or less, of computers, computer software, school computer equipment;
• noncommercial purchases of school supplies, school art supplies and school instructional materials with sales price of $50 or less per item;
• noncommercial book purchases with sales price of $30 or less per book.

The exemption does not include clothing accessories or protective or recreational equipment.

Connecticut: On August 15-21, clothing and footwear costing less than $300 per item are exempt. The exemption does not include accessories or athletic or protective clothing.

Florida: On August 13-15, the following are exempt:

• books,
• clothing,
• wallets or bags (including handbags, backpacks, fanny packs and diaper bags) with a sales price of $50 or less per item; and
• school supplies with a sales price of $10 or less per item.

The exemption excludes briefcase, suitcases and other garment bags and also does not apply to sales made within a theme park, entertainment complex, public lodging establishment or airport.

Georgia: In 2009, the state held sales tax holidays for clothing and school supplies and computers as well as for energy-efficient and water-efficient products. However, the state has not enacted any sales tax holidays for 2010.

Illinois: On August 6-15, footwear and clothing with a sales price of less than $100 per item, and school supplies, will be exempt.

Iowa: On August 6-7, clothing and footwear with a sales price of less than $100 per item are exempt. The exemption excludes accessories, rentals, athletic or protective clothing.

Louisiana: On August 6-7, the first $2,500 of the sales price of noncommercial purchases (not leases) of items of tangible personal property (not vehicles or meals) is exempt. The exemption does not apply to local taxes (may be allowed in St. Charles Parish).

Maryland: On August 8-14, clothing and footwear with a taxable price of $100 or less per item will be exempt. Accessories are excluded.

Mississippi: On July 30-31, clothing and footwear with a sales price under $100 per item are exempt. This does not include accessories, rentals, skis, swim fins or skates.

Missouri: On August 6-8, exemptions are provided for:

• noncommercial purchases of clothing (but not accessories) with a taxable value of $100 or less per item;
• school supplies up to $50 per purchase;
• computer software with a taxable value of $350 or less;
computers; and
• computer peripherals up to $3,500.

Localities may opt out. If less than two percent of a retailer's merchandise qualifies, the retailer must offer a refund of sales tax paid if the customer requests one, in lieu of the tax holiday.

New Mexico: On August 6-8, sales of the following items are exempt from sales tax:

• footwear and clothing with sales price of less than $100 per item;
• school supplies;
• computers with a sales price of $1,000 or less per item; and
• computer peripherals with a sales price of $500 or less per item.

Retailers are not required to participate. The exemption excludes accessories, athletic, or protective clothing.

North Carolina: On August 6-8, purchases of the following items are exempt from state sales tax:

• clothing and school supplies with a sales price of $100 or less per item;
• school instructional materials with a sales price of $300 or less per item;
• sport/recreational equipment with a sales price of $50 or less per item;
• computers with a sales price of $3,500 or less; and
• computer supplies with a sales price of $250 or less per item.

The exemption does not include clothing accessories or protective equipment.

Oklahoma: On August 6-8, clothing and footwear with a sales price of less than $100 are exempt. Purchases of accessories, athletic, or protective clothing or rentals are not exempt.

South Carolina: On August 6-8, clothing (but not rentals), clothing accessories, footwear, school supplies, computers, printers, printer supplies, computer software, bath wash clothes, bed linens, pillows, bath towels, shower curtains and bath rugs are exempt.

Tennessee: On August 6-8, clothing (but not accessories), school supplies and school art supplies with a sales price of $100 or less per item, and computers with a sales price of $1,500 or less per item are exempt.

Texas: On August 20-22, clothing, footwear and school backpacks with a sales price of less than $100 per item are exempt. Accessories, athletic or protective clothing, or rentals, are excluded.

Vermont: On March 6, items of tangible personal property sold to individuals for personal use at a sales price of $2,000 or less were exempt. However, the similar August back-to-school holiday held in previous years was not enacted for 2010.

Virginia: On August. 6-8, clothing and footwear with a selling price of $100 or less per item, and school supplies with a selling price of $20 or less per item, are exempt.

Holidays for Varied Purposes

In addition to holidays timed for back-to-school buying, a number of states have enacted tax holidays offered at various times throughout the year to promote other kinds of purchases.

Energy efficiency is the most common theme, with five states offering these types of holidays. Missouri and Texas have already held energy-efficiency holidays, in April and May of this year respectively. North Carolina (Nov. 5-7), Virginia (Oct. 8-11) and West Virginia (Sept. 1-Nov. 30) have such holidays scheduled for this fall. Georgia, which had an energy-related sales tax holiday in 2009, failed to enact one for 2010.

Louisiana and Virginia continued to hold tax holidays for hurricane-preparedness supplies in the spring of this year.

Louisiana and South Carolina continue to have firearms-related tax holidays. Louisiana's covers noncommercial firearms, ammunition and a broad range of hunting supplies (but not the purchase of animals for the use of hunting). It is held each year on the first consecutive Friday through Sunday of September (in 2010, the holiday will be held on September 3-5). South Carolina provides an annual tax holiday for sales of handguns, rifles and shotguns during what the legislature dubbed "Second Amendment Weekend" - the Friday and Saturday following Thanksgiving (in 2010, the holiday will be held on November 26-27).

Posted July 27, 2010.