It’s that time of year again! Over the next several weeks, 17 states will participate in tax-free holidays.
What it is
Tax free holidays are a period of the year– generally coinciding with the beginning of the school year–where state and local governments lower or eliminate sales tax on certain items.
Created as an incentive to businesses, the first state wide tax holiday took place in New York in 1997. Since then, the initiative has steadily grown and now includes 16 additional states.
Generally the tax free holiday occurs on a weekend—beginning on a Friday and ending on Sunday evening. However, some states have extended the tax exemption for an entire week.
Tax free holidays have traditionally occurred during a peak shopping season when consumers are doing high volume shopping for necessities. The holiday currently happens right around the peak of back-to-school shopping season.
This year the states that will be offering tax relief are: Alabama, Arkansas, Connecticut, Florida, Georgia, Iowa, Louisiana, Maryland, Mississippi, Missouri, New Mexico, Ohio, Oklahoma, Tennessee, Texas, South Carolina, and Virginia.
If your state isn’t on the list, it’s likely because state legislation had budgetary concerns, or didn’t believe the economic value would make a big enough impact. Kay Bell, tax analyst with Bankrate.com notes that lawmakers are often torn about the benefits of tax free days, which are costly to the state.
“The holidays can cost state treasuries millions of dollars and when states opt out that’s usually why,” said Bell in an interview with NBC News. “But shoppers, otherwise known as voters, like them, so when states decide to hold sales tax holiday even at a fiscal cost, it’s because they want to keep voters happy.”
How it works
During the time designated “tax free holidays,” states designate certain items as being exempt from sales tax.
Bell offers the following advice: “If your state has a holiday, make sure you know the times and dates, what items are tax free, or tax reduced, and then shop only for those products.”
The most common tax-free items are clothing and school supplies. However some states have expanded their definitions of school-related purchases, meaning shoppers could save substantial taxes on computers and accessories.
The Devil is in the details
It is extremely important to pay close attention to the details associated with your state’s holiday. Each state sets its own individual and precise rules for what qualifies for the tax-free exemption. There are also purchasing guidelines that cover such things as multiple items, rain checks, layaways and coupons.
Consumer and money saving expert Andrea Woroch offers this advice in ensuring you maximize this opportunity and stretch your dollars:
“Before you jump on the first offer, research and compare prices. You can use apps like ShopSavvy for instant in-store price comparison, and leverage these findings to request a price match. Also, the Invisible Hand browser extension provides pop-up notifications if something you’re eyeing online is sold at another site for less. Use Trackif.com to track price drops as the site sends you sales notifications on products you’ve purchased so that you know when to request a price adjustment as most stores offer a seven-to-14 day window to do so.”
For a complete list of participating states, eligible items and dates of the holiday in your area visit the NBC News Consumer Website.