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What You Need To Know About State Sales Tax Holidays



State Sales Tax Holidays

Although not all states offer sales tax holidays to consumers, 17 states across the country (as well as Puerto Rico) currently offer specific dates where shoppers can buy certain items without paying the sales tax on them. While they’re designed as an incentive for consumers to support local businesses, and they’re an interesting approach some states take, it’s difficult to know if they’re really all that effective in driving the local economy – plus these holidays can cause quite a headache for retailers. Which States Offer Sales Tax Holidays?

Here is a quick summary:

  • Alabama: Severe weather preparedness, February 22-24 and back to school, July 19-21
  • Arkansas: Back to school, August 3-4
  • Connecticut: Clothing and footwear, August 18-24
  • Iowa: Clothing and footwear, August 2-3

  • Florida: Disaster preparedness, May 31-June 6 and back to school, August 2-6
  • Louisiana: Second Amendment (e.g. ammunition and firearms), September 6-8
  • Maryland: Energy efficiency (Energy Star products), February 16-18 and Shop Maryland Tax-Free Week (apparel, footwear, backpacks and book bags), August 11-17
  • Massachusetts: Single items of tangible personal property, August 17-18
  • Mississippi: Clothing and footwear, July 26-27 and Second Amendment, August 30-September 1
  • Missouri: Energy efficiency, April 19-25 and back to school, August 2-4
  • New Mexico: Back to school, August 2-4 and small businesses, November 30
  • Ohio: Back to school, August 2-4
  • Oklahoma: Clothing and footwear, August 2-4
  • Puerto Rico: Back to school, January 4-5
  • South Carolina: Back to school and bed & bath items, August 2-4
  • Tennessee: Back to school, July 26-28
  • Texas: Emergency preparedness, April 27-29, energy and water efficiency, May 25-27 and back to school, August 9-11
  • Virginia: Back to school, energy efficiency, emergency preparedness and more, August 2-4

As you can see, each state has different sales tax holidays – and the criteria doesn’t end with when they are or the types of items. Some also have caps on how much of the purchase is tax-free, ranging from $20 to $2,500. Some of the states also specify that retailers have the option to participate, whereas other states don’t grant them that choice.

What Makes Sales Tax Holidays Challenging?

Sales tax holidays can be a nightmare for retailers for a few reasons:

  • The guidelines change from year to year. Some years certain items fall under the sales tax holidays, some years they don’t. This means there’s even more to track as retailers collect and remit state sales tax, including:
    • When and where they are
    • Which products are exempt
    • The exemption cap for each type of item is
  • While the state may waive sales tax on these holidays, not all localities do. An example Avalara provides is from last year’s back-to-school sales tax holiday. As you can imagine, it can make compliance much more complicated for retailers and confusing for consumers who expect no sales tax on their purchases at all.
    • Geneva County applied the sales tax holiday to the 1% regular county sales and use tax but not the 1% education sales and use tax.
    • Spanish Fort granted the exemption for the 1.5% tax collected in jurisdiction 9102, but not the 1% tax collected in the Spanish Fort East Shore District (9202), or the 2.45% tax collected in the Spanish Fort Town Center District (9203).
    • Thomasville allowed the exemption for the 5% Thomasville sales and use tax but not the 0.5% school sales and use tax or the 0.5% tax collected for the hospital/industrial board.
  • Sales tax holidays can also apply to online purchases. As Bankrate explains, “Eligible purchases made online during the tax holidays are tax-exempt, including merchandise bought on Amazon.” Given the confusion that already exists around online sales tax compliance, this is yet another aspect that makes sales taxes difficult for retailers.
Are Sales Tax Holidays Worth It?

Although consumers certainly seem to enjoy sales tax holidays, there’s debate about how effective they really are. According to Dylan Grundman, a senior policy analyst at the Institute on Taxation and Economic Policy, “People shift purchases, but don’t increase their overall spending. So, the boost to business doesn’t really materialize.” Savings to the consumer is also fairly modest. Some of the sales tax exemptions only apply to $20 or $60 purchases, which only saves the shopper a few dollars.

Grundman also explains these policies remove hundreds of millions of dollars from the community’s resources for schools, roads and healthcare – a major cost for the state – without a major benefit for families themselves.

Have a question? Contact Monika Miles

 

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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