By Paul N. Gada, CCH Toolkit Staff Writer
Several states have upcoming sales and use tax holidays, during which back-to-school items such as clothing, footwear, school supplies, and computers may be exempt.
Reaction to such holidays is mixed. State lawmakers see the tax holiday as a way to lessen the tax burden on working families and to jump-start local retailers, according to a report issued by the Federation of Tax Administrators (FTA). The report, State Tax Holidays: Tax Holidays Continue Despite Criticisms, says opponents of the tax holidays, however, see the policy as a gimmick, and not as helpful to the consumer as proponents claim. For a typical family spending $250 on back-to-school clothes, an average six percent sales tax exemption would result in $15 in tax savings for the family, the FTA notes.
Though the savings amount may seem relatively small, shoppers have previously flocked across state lines to take advantage of such sales tax holidays. A notable example occurred when New Jersey had a clothing and footwear sales tax holiday that helped fill its shopping mall lots with cars bearing New York license plates.
Small Business Opportunities
For small business owners, the shopping frenzy related to a state sales tax holiday should be viewed as a great chance to increase their sales and profits. To make the most of this opportunity, however, a small business owner must create a carefully planned marketing campaign with the sales tax holiday as its centerpiece.
At a minimum, the marketing campaign should notify potential customers of the savings available because of the sales tax holiday and entice them away from other businesses offering similar products. To accomplish these goals, there are many advertising and promotion options to choose from. Whatever your choices, the most important thing to do is to act fast before the sales tax holiday, and any related opportunities, expire.
Current Sales Tax Holidays
Four new states are offering holidays this year: Alabama, Maryland, Tennessee and Virginia. New York, which held holidays in past years, now has a year-round exemption for clothing, footwear and items used to make or repair exempt clothing costing less than $110.
It's a good idea to regularly check with your state's department of revenue to keep up with any new developments in this (or any other) area. For example, Massachusetts currently is considering a proposed sales tax holiday that has not yet been enacted. States also provide updates and more detailed information about existing sales tax holidays via their revenue departments' web sites.
The following is a list of states with sales tax holidays in place for 2006, with the dates of the holiday and the types of items covered:
Alabama: From August 4-6, 2006, the following are exempt: clothing costing $100 or less per article; a single purchase costing $750 or less of computers, software and school computer supplies; noncommercial purchases of school supplies and instructional materials up to a sales price of $50 per item; and noncommercial purchases of books up to $30 each.
Connecticut: Clothing and footwear sold for less than $300 are exempt from sales and use tax from August 20-26, 2006. The holiday exemption replaces the regular exemption for clothing and footwear costing less than $50, which remains in effect for all other periods, and it does not apply to athletic or protective clothing and footwear, jewelry, handbags, luggage, umbrellas, wallets and watches.
District of Columbia: Sales of school supplies, clothing, accessory items and shoes for $100 or less are exempt from sales tax from August 5-13, 2006.
Florida: Books, clothing, footwear and certain accessories with a sales price of $50 or less per item, and school supplies with a sales price of $10 or less per item, are exempt from Florida sales and use tax from July 22-30, 2006. The exemption does not apply to sales within a theme park, entertainment complex, public lodging establishment or airport.
Georgia: From August 3-6, 2006, Georgia sales and use tax does not apply to certain school supplies (up to $20 per item); clothing and footwear (priced at $100 or less per article); computers, computer-related accessories and energy-efficient products for noncommercial use (for a single purchase of $1,500 or less).
Iowa: The state's sales tax holiday on select clothing and footwear runs August 4-5, 2006. During the holiday, no sales tax, including school and local option sales taxes, will be collected on clothing or footwear that have a selling price of less than $100 per item. Certain accessories are excluded from the tax holiday.
Maryland: From August 23-27, 2006, clothing and footwear (excluding accessories) costing $100 or less are exempt.
Massachusetts: Proposals for a holiday in 2006 are still pending in the Massachusetts legislature, but these have encountered opposition and their fate is uncertain. In 2004 and 2005, Massachusetts held a sales tax holiday the second weekend in August during which retail sales of practically any item costing $2,500 or less were exempt.
Missouri: From August 4-6, 2006, retail sales of the following are exempt from state sales tax: clothing and footwear (excluding certain accessories) costing $100 or less; school supplies costing $50 or less; computer software with a taxable value of $350 or less; and personal computers and computer peripheral devices sold for $3,500 or less. If less than 2 percent of a retailer's merchandise qualifies for the tax holiday, the retailer must offer a tax refund in lieu of the tax holiday.
New Mexico: Customers may buy the following items free of tax from August 4-6, 2006: clothing or shoes sold for less than $100 (excluding items primarily for athletic or protective use); computers (but not handheld computers) sold for no more than $1,000, and any associated monitor, speakers, printer, or related items sold for no more than $500; notebooks, paper, writing instruments, crayons, art supplies, paper clips, staples, staplers, scissors and rulers priced under $15; and book bags, backpacks, handheld calculators, maps and globes priced under $100. However, retailers are not required to participate.
North Carolina: The sales and use tax holiday runs from August 4-6, 2006. Exempt items are clothing and school supplies with a sales price of $100 or less; sports and recreation equipment with a sales price of $50 or less; computers with a sales price of $3,500 or less; and computer supplies costing $250 or less. Clothing accessories, protective equipment, furniture and rentals are not exempt during the holiday.
South Carolina: During the period August 4-6, 2006, clothing, clothing accessories, footwear, school supplies, computers, printers, printer supplies, computer software and linens for the bed and bath are exempt from state and local sales tax. Certain items, including, but not limited to jewelry, cosmetics and furniture, are not exempt during the holiday.
Tennessee: Clothing and school supplies costing $100 or less and computers costing $1,500 or less are exempt from August 4-6, 2006.
Texas: From August 4-6, 2006, sales of most clothing and footwear priced at less than $100 are exempt from state and local sales taxes. Clothing and footwear used primarily for athletic activities or for protective wear are ineligible for the exemption. Accessories and rentals of clothing also are excluded from the holiday.
Virginia: Sales of clothing and footwear costing $100 or less and school supplies costing $20 or less are exempt from August 4-6, 2006.
- Related items:
- U.S. Consumption Taxes All Over the Map
- IRS Concedes Defeat on Long Distance Telephone Tax; Refunds To Be Granted
- New Retirement Savings Opportunities in Recent Tax Relief Law
- Congress Extends Tax Relief Provisions with Offsets, Seeks To Reinstate Expired Credits
- New Tax Year Means Many Tax Changes to Consider
Added to the news on August 2, 2006.
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