Making the Most of Sales Tax Holidays
By Kelli B. Grant/SmarMoney.com
Shoppers may be able to save more than the usual 4% when sales-tax holiday season kicks off this weekend, thanks to the early wave of back-to-school deals.
The temporary tax reprieves effectively discount prices on items such as clothing, computers and school supplies. Depending on the state, the savings range from 4% to 7%. That’s where the back-to-school sales come in.”The best prices are going to be in the next two weeks,” says Jeff Green, an independent retail analyst. By stacking the tax savings with the school sales, consumers can shave up to $48 off the average spending of $689 on kids in grade school; and up to $63 on college-bound teens’ average $907 tab.
State participation in the tax holidays continues to grow, too. They’ve “been tremendously successful at drawing consumers into stores,” says J. Craig Shearman, a spokesman for the National Retail Federation. That business boost and consumer goodwill can be more valuable than tax revenue, he says. So far, 17 states enacted summer promotions, the first of which — Mississippi’s — starts today [Friday]. (See list below for full details on all the confirmed state holidays.) Georgia brought back its August tax holiday this year after a hiatus from 2010-2011 the state attributed to budgetary concerns, and Alabama, which first offered a holiday in 2011, renewed it for this year. Massachusetts is also working to approve an Aug. 11-12 holiday that would waive the 6.25% tax on most items valued at $2,500 or less.
But while tax holidays offer many enticements, to maximize the savings it pays to understand the deals’ nuances and fine print.
Local taxes
A state tax holiday doesn’t mean purchase will be entirely tax free. There may still be a county, city or jurisdiction sales tax in effect, says Carol Kokinas-Graves, a senior analyst for tax advisory firm CCH. In Alabama, where the state sales tax is 4%, those local taxes could still add up to as much as 8%. St. Clair County, Ala., plans to waive its 1% tax, but still charges a 1% levy that goes toward the district’s schools. Check with the tax commission to see what your town is doing before deciding which area mall to visit.
Savings strategies
Consumers may find that some of their purchases won’t benefit from the tax holiday. States typically list out rules for how markdowns like “buy one, get one free” or manufacturers coupons are handled, says Kokinas-Graves. For example, Iowa wouldn’t require a consumer to pay tax on a $110 pair of shoes on sale for $90 — which pushes it below the $100 threshold — but would if the discount was from a manufacturers coupon or rebate.
Exemptions
Categories like “clothing” and “school supplies” are broad, but most states list out specifics, says Shearman. Some are broader than you might think — North Carolina considers disposable baby diapers clothing, meaning it may be a good time to stock up, and South Carolina adds in items including blankets, bed linens, and formal clothing such as wedding dresses. In Arkansas, “clothing” also covers blush, aftershave, deodorant and select other personal care products. But there can also be notable items left out, he says. Athletic clothing is often still taxed, as are extras like belts and purses.
Timing
States time down to the minute when holidays begin and end, which can make saving complicated. It usually comes down to when you pay. Connecticut, for example, won’t charge tax on rented tuxes picked up during the holiday and returned later, but will charge on those picked up before and returned during the holiday. New Mexico requires online orders be paid for and in some cases delivered during the holiday period to qualify. Layaway and pre-ordered items are usually taxed, too, Kokinas-Graves says.
Here are the details on the 17 state sales tax holidays, in alphabetical order:
- Aug. 3-5, save 4%
- Clothing with a price of $100 or less
- Computers and computer software priced at $750 or less
- School supplies, art supplies and instructional materials worth up to $50
- Books with a price of $30 or less
- Aug. 4-5, save 6%
- Clothing under $100
- Clothing accessories and select personal care products under $50
- Eligible school supplies, art supplies, instructional materials of any price
- Aug. 19-25, save 6.35%
- Clothing and footwear with a price $300 or less
- Aug. 3-5, save 6%
- Clothing, footwear and accessories with a sales price of $75 or less
- School supplies with a price of $15 or less
- Aug. 10-11, save 4%
- Clothing and footwear priced at $100 or less
- A single purchase of up to $1,000 worth of computers and computer accessories
- School supplies with a price of $20 or less
- Aug. 3-4, save 6%
- Clothing and footwear priced at $100 or less
- Aug. 3-4, save 4%
- All “tangible personal property” worth $2,500 or less, except vehicles, meals and services
- Aug. 12-18, save 6%
- Clothing and footwear with a price of $100 or less
- July 27-28, save 7%
- Clothing and footwear priced at $100 or less
- August 3-5, save 4.225%
- Clothing priced at $100 or less per item
- School supplies worth up to $50
- Computer software worth $350 or less
- Computers and computer supplies priced at up to $3,500
- Aug. 3-5, save 5.125%
- Clothing and footwear with a sales price of less than $100
- School supplies priced at $15 or less
- Computers worth up to $1,000
- Computer supplies priced at $500
- Aug. 3-5, save 4.75%
- Clothing and with a sales price of $100 or less
- School supplies priced at $100 or less
- School instructional materials with a price of up to $300
- Sports and recreational equipment priced at $50 or less
- Computers with a price of $3,500 or less
- Computer supplies with a sales price of $250 or less
- Aug. 3-5, save 4.5%
- Clothing and footwear priced under $100
- Aug, 3-5, save 6%
- Clothing, accessories and footwear of any price
- School supplies of any price
- Computers, printers, printer supplies and computer software of any price
- Other items — including bed linens, bath towels, and shower curtains — of any price
- Aug. 3-5, save 7%
- Clothing priced at $100 or less
- School supplies and art supplies with a sales price of $100 or less
- Computers with price of $1,500 or less
- Aug. 17-19, save 6.25%
- Clothing and footwear with a sales price of less than $100
- School backpacks priced at $100 or less
- Aug. 3-5, save 4%
- Clothing and footwear with a sales price of $100 or less
- School supplies with a price of $20 or less
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