Who doesn’t love a good holiday weekend? An extra day off from work, an extra cupcake (because calories don’t count on a holiday), and a bonfire in the back yard with the family to round it all out. Sounds like the perfect weekend, right? What could make it any better? Not having to pay taxes on that day!
In 2019, sixteen states had sales tax holidays—weekends, or weeks, where some or all items were exempt from sales tax. The intent is to increase spending or at least shift spending to help businesses during typically slow periods in consumer spending. The question is, are you, the consumer, actually going to save money? Let’s take a look.
Each state that offers a sales tax holiday has different stipulations as to what and how much is tax-exempt during the tax holiday. The majority of these holidays are July through August and focus on back to school items like clothing, school supplies, and computers.
A few states even have two tax holidays every year. They have the back to school one and one earlier in the year focused on hurricane preparedness, with tax breaks on generators and disaster relief supplies. Then there is Mississippi, which has a sales tax holiday right before hunting season. Texas has three: back to school, hurricane supplies, and then Energy Star products like air conditioners and other appliances.
Massachusetts is the only state with no restrictions on what goods you can buy, as long as it’s less than $2,500 per item except clothing, which is $175 per article.
What to look out for:
Why do states host these tax-free weekends? On the surface it seems there is a push to drive spending. However, most of the products available during these times are necessary or items that people rarely buy more than once.
There are a few things that businesses should know about tax holidays. Most states have specific rules about how a business can operate for a tax holiday. Here are a few things to consider beforehand.
In the end, take advantage of a tax holiday if you can. But be aware of what you’re buying. Make sure it’s something you need or were planning to buy. You aren’t saving any money if you buy more than you need or can afford.