Seventeen states will be exempting various back to school items from sales tax this year

Shoppers get excited about the many back to school sales this time of year. Adding fuel to the fire, many states will be waiving the state, and sometimes local, sales tax on school-related items. Generally, this means clothing, footwear, school supplies such as pencils and paper, and sometimes computers are exempted from sales and use tax for anywhere from two days to a week.

While some state representatives bemoan the loss of the sales tax revenue during this purchasing frenzy, many retailers, already offering various sales and discounts, appreciate the extra incentive shoppers are given to open their wallets. The cost versus benefit of these sales tax holidays is the subject of frequent debate but one fact is clear – consumers love it.

Consumers need to keep in mind that even though the state may be waiving the sales tax, certain local taxes, such as county, city, and/or special district may still apply. For instance, the purchase of an $800 computer in Atlanta, Georgia made on Aug. 10 qualifies for a waiver of the 4% Georgia state tax  - saving a total of $32. It is still subject to the Fulton county tax of 3% plus the Atlanta metro tax of 1%, meaning that the consumer will pay $32 in local taxes on the purchase instead of the usual $64.

Some states, such as Louisiana, waive the sales and use tax on nearly all retail transactions during the back to school holiday. Normally though, exemptions are limited to items specifically targeted toward getting kids ready to return to academia. Most states also limit the exemption to sales, or portions of sales, below a certain dollar threshold – generally purchases retailing at less than $100 per item. In other words, no matter where Kim Kardashian is shopping, she’s going to be paying the full sales tax on the Gucci pumps and diamond-studded iPhone.

The sales tax exemption rules can get quite complicated, so consumers need to do their homework diligently before they hit the mall. The type of sale the store chooses to host can make an otherwise-eligible item taxable. In one example, a retailer in a state with a $50 threshold advertises pants as “buy one, get one free.” The first pair of pants is priced at $80; the second pair of pants is free. Tax is due on $80. The store cannot sell each pair of pants for $40 in order for the items to qualify for the exemption. However, the retailer may advertise and sell the items for 50% off, selling each pair of $80 pants for $40, making each pair eligible for the exemption.

Manufacturers’ coupons and rebates do not reduce the sales price of an item in the eyes of the tax collector. Store coupons and discounts do reduce the sales price therefore making many more items fall within the dollar cap.

Layaways, gift certificates, and rain checks qualify for the sales tax exemptions. Exchanges made post-holiday are not taxable, but items purchased during the sales tax holiday and returned for a refund paired with a new purchase are taxable.

Below is a full listing of states holding back to school sales tax holidays this year. The holiday dates, percentage shoppers can expect to save, and general rules governing the eligibility of items are provided. This list is not all inclusive, so please check the provided state web sites for specifics.

Charles F. Spielmann