What Everyone Should Know about Tax-Free Weekends

Credit: Hip2Save

Credit: Hip2Save

Do you have $634.78 for school supplies? The average family will spend that during this year’s back-to-school shopping season, according to a recent study by the National Retail Federation. Many experts advise consumers to shop during the tax-free weekends to take advantage of the “excellent” savings that are offered; consequently, spending is expected to exceed $25 billion.

Consumers can save during this shopping season, but here is what everyone should know about Tax-Free Weekends:

When are the Tax-Free Weekends?
The holiday begins in late July, and it ends in late August.

Where are the holidays observed?
The following 17 states are participating in a Tax-Free Weekend at various times: Alabama, Arkansas, Connecticut, Florida, Georgia, Iowa, Louisiana, Maryland, Mississippi, Missouri, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia.

What items are exempt?
The tax-free items will vary from state to state; so, be sure to check with retailers in your state. In general, clothing, electronics, footwear, and supplies are exempt.

Who supports the holidays?
Most politicians promote the holiday as stimulating to the economy, and many businesses welcome the increase in customer traffic. Consumers often get excited about the holiday because they are typically shopping for several children, and they want to purchase items at “excellent” savings.

How can the holiday be determined as a success or failure?
Parents often have to deal with crowds and long lines, which may not be worth the effort. Some retailers place maximum amounts on purchases that can be tax exempt (ex. items up to $2500). A few states have indicated that they have lost millions of dollars in revenue due to their inability to collect sales taxes. Yet, the success or failure of this holiday is based on how people feel. Consumers’ often perceive the holiday as a success; so, that becomes their reality. Despite those perceptions, the benefits of tax-free weekends are marginal.

Why are the benefits of Tax-Free Weekends considered marginal?
If you splurge on items that were not on your shopping lists, true savings are not realized. Most retailers give less than 7 percent off, and many retailers only give 4-5 percent off. You don’t pay those state taxes, but you must pay local sales taxes. That’s not quite tax free!

You also need to consider this: August is the best time to buy electronic items (computers, cell phones, etc.), but September is the best time to purchase school supplies. By September, retailers will discount the school supplies that have not sold. Savvy shoppers often purchase school supplies for the next year during the month of September.

Now that you know more about Tax-Free Weekends, will it help you to make better decisions?

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