States on Holiday – a Tax Holiday

As parents and students get ready for a new school year after summer vacation, states are offering a different kind of holiday: a tax holiday. 

According to the Federation of Tax Administrators, 17 states this year are offering sales tax breaks on items purchased during a specified period of time.  For a few days each year, usually around the time students are beginning their fall semesters, states let the sales tax slide on back-to-school items like clothing, books, footwear, backpacks, school supplies, computers, and sports equipment as well as other items like energy star products, air conditioners, hurricane preparedness items and generators. One state – Louisiana – offers a tax holiday for two days in September to purchase firearms, ammunition and hunting supplies. 

The tax holidays last 2-6 days, depending on the state and most take place between May and October, with a majority occurring in early to mid August. New York was the first state to offer a holiday, back in 1997, but will not be offering a tax break this year.

In Florida, the tax-free days begin on August 12 and end on August 14. Shoppers will get a tax break on school supplies, books and clothing.  Sen. Ellyn Bogdanoff thinks the holiday is a good idea.  “The back-to-school sales tax holiday has always been a way to boost retail sales and help customers save on necessities,” Bogandoff told the Miami Herald. “Small or large, the economic impact this bill provides to families and retailers is a welcome break.”

The Miami Herald reports that in years past, Florida has held 7-10 day holidays, but difficult fiscal conditions caused the Florida Legislature to axe those programs in 2008 and 2009.  The two day holiday was reinstated last year and resulted in$115 million more in taxable spending statewide than in the same weekend in 2009, when there were no additional tax savings.

In Massachusetts, the two day tax holiday is more generous than in most states, giving shoppers a break from a 6.25% sales tax on all single items costing less than $2,500, excluding vehicles, motorized boats, tobacco, meals and utilities. Reuters reports that Massachusetts shoppers saved nearly $20 million during last year's tax holiday.

Tax holidays are often popular among state leaders because they lower taxes (if only for a brief time), are often targeted at necessities that benefit low and middle-income shoppers and tend to spur consumer demand, but they do have some critics.  

Opponents of tax holidays commonly brand them as “gimmicky” or argue that it would be better to lower tax rates overall, rather than do so for such a short period of time on such a limited number of items.  Other opponents argue that tax breaks aren’t fiscally responsible when states are facing depressed revenues and are being forced to cut services to balance strapped budgets.  

State Tax Holidays, 2006-2011

State counts calculated from information collected by the Federation of Tax Administrators