State Sales Tax Holidays
The sales-tax-holiday season is when states give the gift of tax-free shopping for clothing, computers and other back-to-school supplies. Governments are always trying strategies to drive the economy, and one of those strategies is the sales tax holiday. Back-to-school shopping season is among us and it can surely become expensive. Typically, teachers spend roughly $400 of their own money on school supplies, while parents spend a ton more. One of the ways that you can save money on your back-to-school shopping is by taking advantage of state sales tax holidays. If your state has a 7 percent sales tax, that’s $7 saved on every $100 spent. If you spend over a thousand dollars, that’s over $70 saved!
It seems like a good thing: Take a little pressure off the pockets of cash-strapped parents, make retailers smile and make politicians look good for supporting tax relief.
Last year, Illinois passed legislation creating a sales tax holiday. Now the state is sitting on the sidelines because it “just cannot afford it this year,” according to State Sen. Toi Hutchinson (D-Chicago), who was the chief sponsor of the state’s holiday last year. It’s expensive to be generous. When states give up their portion of the sales tax, they give up much-needed revenue for a weekend or, in some cases, for up to a week.
Another example is North Carolina. According to press reports, the state department of revenue last year estimated that it gave up $14.5 million during the its back-to-school tax holiday and $1.7 million during its November tax holiday for Energy Star appliances.
In 2011, 17 states will conduct back-to-school sales tax holidays, down from a peak of 18 states in 2010, according to Mark Robyn, staff economist and co-author of the Tax Foundation’s,Sales Tax Holidays: Politically Expedient but Poor Tax Policy.
Sales tax holidays are meant to stimulate the state’s economy by encouraging consumers to buy more, usually during big retail events like back to school or in preparation for warm or cold weather. While some detractors, like the Tax Foundation, maintain that sales tax holidays are a political ploy rather than an actual driver of the economy, they seem to be here to stay in many states.
States with No Sales Tax Holidays in 2015
States not participating in Sales Tax Holidays are Arizona, California, Colorado, District of Columbia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.
What Should Online Sellers Do About Sales Tax Holidays?
Online sellers should not collect sales tax on tax exempt items during sales tax holidays. Some channels will automatically turn of sales tax collection for you during this time. For example, Amazon will turn off sales tax collection for you for items coded as (A_SCHL_SUPPLIES) during sales tax holidays (you’ll need to be logged in to Seller Central to see this link.) But for the most part, it’s up to you as a seller to keep up with sales tax holidays and make sure you’re not charging your buyers sales tax on exempt items during sales tax holidays. The requirement to keep up with sales tax holidays is just another way that sales tax increases in complexity for online sellers.