Consumers in some US states are gearing up for an annual shopping holiday free from sales tax.
As summer comes to an end, consumers nationwide head to retailers to purchase the supplies that will fill classrooms and college dorms come fall. Due to the rising cost of these necessities, many states now offer an annual tax-free holiday during the back-to-school season.
This year, 16 states are participating in tax-free holidays during the back-to-school shopping season. Eligible items vary by state, but typically include classroom items, clothing, and computers. Most participating states set a ceiling price for eligible items.
Tax-free holidays can be a critical sales driver for brick-and-mortar retailers, where sales have been lost to online shopping. With back-to-school and back-to-college shopping expected to hit a record $83.6 billion this year, tax breaks are expected to attract consumers looking for a bargain.
Retailers in participating states can take advantage of the holidays by offering promotional prices to attract consumers. Allowing shoppers to stack discounts can create excitement about the holiday and drive traffic to stores.
Generally, the tax-free benefit only applies to state sales tax and all local sales taxes are still applied. Savings for consumers usually range between 5-10%, depending on the sales tax levied in a state. Participating states include Alabama, Arkansas, Connecticut, Florida, Iowa, Louisiana, Maryland, Mississippi, Missouri, New Mexico, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. Georgia recently cancelled their tax free holiday.
Sales tax holidays are available in other states at different points throughout the year. For a complete list visit the Federation of Tax Administrators.