State sales tax holidays have become a popular way to boost retail sales by offering shoppers a way of saving money on certain items and supplies during a specified time. Seventeen states have enacted sales tax holidays during 2013, many scheduled to coincide with back-to-school shopping. The holidays typically run for one weekend and generally cover only certain items.
Primarily scheduled in late July or early August, 15 of the 17 states exempt clothing and footwear from sales tax during their holiday, although the exemption is only on those items that are under a given price limit. South Carolina is the only state that does not place a per-item price limit on the exemption. Many of those states also extend the exemption to certain supplies and education-related electronics, but a few, including Iowa, Maryland, Mississippi and Oklahoma, limit it to just clothing and shoes.
Louisiana is the lone state the provides shoppers with a means of saving money by having it’s sales tax holiday cover nearly all purchases up to $2,500 during the specified weekend. Virginia is unique in offering three different sales tax holidays, with each one covering specific categories. New York does not offer an actual sales tax holiday, but exempts clothing and shoes under $110 per item from sales tax throughout the year. Check here for a complete list of the states offering sales tax holidays this year and what items are covered.
It’s easy to understand why brick-and-mortar retailers have supported sales tax holidays. It keeps them competitive with online shopping, and many stores offer other sales designed to attract even more consumers. Although there has been little research on the efficacy of sales tax holidays, shoppers have happily embraced these measures as a means of saving money on items they must purchase each year. Legislators, such as Florida Rep. Larry Ahern have cited constituents as the main reason for sponsoring his state’s holiday. “We are trying to take some of the burden off Florida families as they prepare for their children to go back to school in August,” he said in a recent phone interview.
There have been plenty of critics who have questioned the wisdom of creating these holidays during a period of budget cuts and reduced revenues. According to the Pew Charitable Trusts, the 2012 sales tax holiday cost the state of Massachusetts $20 million dollars. The holiday was discontinued in the state for 2013. Still, lawmakers continue to support these initiatives, prompted by the need to keep their retailers competitive with neighboring states.
For now, it appears that sales tax holidays will remain a constant on state tax calendars. While they do cost states needed revenues, the ability to demonstrate to their constituents that they are doing all they can to promote saving money, legislators are likely to continue approving these measures.