This year, the new semester tax “holiday” that many states offer each summer is being expanded with a new type of tax exemption aimed at overcoming price increases for needy consumers.
Some states have added or extended the period during which shoppers can make various purchases without state (and in some cases local) sales taxes. Also, in some states, gasoline taxes are temporarily suspended or planned to be suspended for more than a few weeks, while in others, food taxes are suspended.
What is behind the new enthusiasm for providing tax breaks?Inflation and a serious match of the great powers Budget surplusJared Walczak, Vice President of State Projects at the Tax Foundation’s State Tax Policy Center, a Washington think tank, has made such vacations feasible and politically appealing from both tax revenues and federal pandemic relief. It states that it did.
“At the same time that the state remains in the black, many taxpayers are struggling under the burden of high inflation,” Walzac said.
According to the report, at least 18 states have sales tax holidays on the 2022 calendar, up from 17 last year. Federation of Tax Managers, A group that services state tax authorities. Some holidays last for days, others for weeks, months, or more.
Some states that already offer New Year holidays are adding new holidays and expanding the category of temporary duty-free items. Connecticut In addition to the traditional tax exemption period in August, we have added a clothing and shoes tax exemption week in April. Tennessee In July, we will hold a regular weekend without sales tax for the new semester. However, it was also extended until June 30, 2023, adding a new holiday in August to exempt food and “food ingredients”. This is a sales tax exemption for gun safes and gun safety devices.
Florida It stands out for its enthusiasm for sales tax holidays. There are already three in the state, dedicated to disaster preparedness equipment, new semester items, and recreational activities. This year, half a dozen more have been added, including a summer tax exemption for children’s books. Annual tax exemption for diapers and baby clothing. Autumn “tool time” week. A two-year period to buy impact-resistant windows and doors to strengthen your home against hurricanes. The state gas tax in October will also be suspended.
Lucy Dadayan, a senior researcher at the Tax Policy Center, a joint venture between two think tanks in Washington, said holidays are often a political motivation.
The four state governors who have accepted the extended tax exemption are running for the reelection of Ron DeSantis in Florida, JB Pritzker in Illinois, Bill Lee in Tennessee, and Ned Lamont in Connecticut.
The popularity of sales tax holidays is disappointing to many tax policy professionals. They say the event provides shoppers with a modest break at best, and often does not adequately target consumers who need the most savings. “State tax holidays tend to be a political gimmick,” Walczak said.
A few research Holidays may simply change the timing of purchases, thus suggesting that the net economic impact is limited.And the report from Tax Foundation Retailers say they may raise prices from time to time during the event.
“What we see is a lack of imagination about what to do to help people,” said Dylan Grundman O’Neill, senior state tax policy analyst at the Institute for Tax and Economic Policy. increase.
Still, that doesn’t mean that individual consumers may not be able to benefit from purchasing certain products during the tax exemption period, he said. “We all want to feel that we are getting a good deal.”
Here are some questions and answers about the state tax exemption period:
Where can I get information about sales tax holidays in my state?
Most state revenue departments provide online details about how sales work, such as dates and a list of eligible items.
How much can I save during a sales tax vacation?
It depends on the condition and the purchased product. Billed by all but 5 states Sales tax, Ranges from 4% to 7% or more of sales, and some local sales taxes that can push the total tax rate to 9% or more. In most states, there is a limit to the amount of purchases that can be exempt from tax during vacation. Some require cities and towns to participate, while others make the tax exemption period optional.
Do state tax holidays apply to merchandise purchased online?
yes. According to the state website, tax exemptions apply if an item is purchased online during vacation, even if it is delivered after the vacation is over. However, goods purchased online and delivered out of state are usually subject to sales tax in the state in which they were received, says Scott Peterson, vice president of tax policy and government relations in the United States. .. At Avalara, a provider of tax compliance software.
