Originally created 07/09/01

States give back-to-school shoppers a tax break



Parents who want to make sure their children have the best book bags and coolest outfits for the coming school year have a friend in many state governments.

State legislators are offering tax holidays - usually in August - to give families a chance to buy clothes, school supplies and other items without paying sales tax.

Customers who have made purchases during previous tax holidays save between $15 and $100 on average, a Federation of Tax Administrators Aug. 16, 2000, report said.

"As a mother and grandmother, I really wish I had had these kind of holidays earlier," Texas Comptroller Carole Rylander said. "I could have saved some real money."

So far, eight states and the District of Columbia have a week-or weekend-long sales tax holiday - Connecticut, Florida, Iowa, Maryland, New York, Pennsylvania, South Carolina and Texas. Other states are mulling similar legislation.

Alaska, Delaware, Montana, New Hampshire and Oregon do not have a sales tax.

Inspired by New York Gov. George Pataki's proposal to start the first sales tax holiday in 1997, states have copied some guidelines, such as making the holiday mandatory for retailers to follow, but have varied in what they exempt, whether they set price limits and how long their sales tax exemptions last.

"It's a good public image for a governor because he can say that he dropped taxes for that weekend," said Ryan Burrus, a spokesman for the Tax Administrators. "But it also does give taxpayers a bit of a break."

Generally occurring in the second week of August, sales tax weekends tend to cost states an average of $25.6 million in state sales taxes and $7 million in local sales taxes, the report said.

"Undoubtedly, this is a good break for parents to get items for their children and not have to pay extra expenses when they're trying to save," Connecticut Department of Revenue spokeswoman Ellen Schneider said.

While most of the states follow New York's example in what to exempt, the specific items exempted vary.

Connecticut, Maryland, Iowa and Texas limit their sales tax exemption list to clothing and footwear, while South Carolina and the District of Columbia include school supplies such as pens, pencils, stationery, book bags and calculators.

In Pennsylvania, which already has a permanent sales tax exemption for clothing, Gov. Tom Ridge's spokesman Steve Aaron said the governor started the state tax-free holiday for consumers who buy computers to help "give the public a week where they wouldn't have to pay sales tax and could get a computer at about $100 cheaper."

If the proposed Pennsylvania budget passes, customers can expect to pay no sales tax on individual accessories to computers, Aaron said. "Last year, when we started this, we only exempted sales tax on whole computer units, and not just if you wanted to get a printer," he said. "This year, we hope to make all computer items have a tax exemption."

People scheduling their back-to-school shopping around these weekends may want to check out the price cap for the state they pick to shop. In all states except for South Carolina and Pennsylvania, price caps are set around a $100 limit per item before a customer must pay sales tax.

"Legislators target their tax breaks at $75 or $100 because they have to make an estimate in the budget and the lowest income family is not going to be able to afford items above the limit," Schneider said. "However, with some of these adolescents' shoes costing well over the limit, Connecticut is looking at raising that limit."

Despite the limitations on the prices and the items, retailers have reported up to 200 percent increases in their weekend sales, the report said.

In Texas, which as a hefty 8.25 percent sales tax, Rylander said she's expecting customers to save more than $33 million. "Texans are appreciating the sales tax holiday here, not just to buy clothes for their kids, but it gives a chance for mom and dad to spiff up their wardrobe at less of a cost."