Market Overview

Boost Back-To-School Savings With A Sales Tax Holiday

Editor's note: This piece was originally published on July 19, 2013

If your family includes children in kindergarten through 12th grade or students in college, it might pay you to find out if your state sponsors a sales-tax holiday for back-to-school shopping. According to Kiplinger, this year 17 states will have sales-tax holidays in July or August.

The concept is simple. During a sales-tax holiday, noncommercial purchases of back-to-school items, including clothing, computers, and school supplies are tax-free. The potential savings are worth noting since, according to the National Retail Federation, the average family spent almost $700 on school-related items last year.

By combining a sales-tax holiday with coupons, taking advantage of sales, and other money-saving tactics, consumers can put a significant dent in back-to-school spending. In addition, merchants in states with sales-tax holidays often plan their back-to-school sales to coincide with the event.

Each state, Kiplinger said, has its own rules and regulations concerns which items are tax exempt. Some enforce a total sales tax holiday – others allow cities and counties to continue to levy their charge so it's possible still to have to pay a minimal sales tax, even during a sales-tax holiday.

A complete list of states offering a back-to-school sales-tax holiday in 2013 can be found at taxadmin.org. The list also includes states that offer tax breaks for other reasons including hurricane preparation, energy efficiency, and even hunting (Louisiana).

In addition, dates and times vary. Some states offer a one or two-day holiday while others, like Connecticut, go a full week. Also, there are limits on the amount you can spend for certain items. Florida restricts the tax exemption on clothing to $75 per item. Items that are more expensive generally have a higher limit. Missouri, for example, exempts the first $3500 spent on computers or computer peripherals.

With the potential for Congress eventually to pass legislation to allow states to charge sales tax on online purchases, sales tax holidays take on even more significance in family budgets. Although, at the rate the debate is slogging its way through the House of Representatives, it may be a while before anybody has to worry about enforcement of an online sales tax.

Related: Senate Passes Online Sales Tax – House in Doubt

In the meantime, with 45 states, plus the District of Columbia and Guam imposing sales taxes, according to Forbes, and with a recent national average sales tax rate of 9.6 percent, any savings consumers can realize by making back-to-school purchases during their state’s sales-tax holiday, seems well worth the time it takes to mark the date on the calendar.

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