Back-to-School Sales Tax ‘Holidays’ Lure Shoppers Despite Slim Savings

Still, the tax holidays have endured, although the number of states holding them has fluctuated, depending in part on a state’s economy and political situation. Last August, Wisconsin held its first sales tax holiday after Gov. Scott Walker, a Republican who was up for re-election, signed legislation enacting the five-day event. (He was defeated in November by Tony Evers, a Democrat.)

This year, Wisconsin has no plans to repeat it, said Patty Mayers, communications director for the state’s Department of Revenue. “That was a one-time occurrence.”

Massachusetts, on the other hand, voted last year to make its holiday permanent after years of on-again, off-again events. (Previously, the holiday had to be authorized by the state legislature each year.)

Shoppers’ savings ranges from 4 to 7 percent, depending on the state; that can rise to 8 or 9 percent if local sales taxes are exempted, which is the case in many states. (Five states don’t have state sales taxes, and some states allow cities and towns to opt out of the holiday.)

Someone buying a $30 backpack in a state with a tax rate of 7 percent would save $2.10. Despite the modest savings, people reliably turn out to shop, perhaps because they just like the idea of not paying taxes.

“People who won’t walk across the street to save $5 on a pair of pants will take a day off from work to take advantage of a sales-tax holiday,” said Verenda Smith, a spokeswoman for the Federation of Tax Administrators.

Here are some questions and answers about sales tax holidays:

Is there a limit on the amount of merchandise that can be purchased tax-free?

That varies by state. Most cap the cost of eligible items. Maryland, for instance, exempts apparel and footwear up to $100 per item, as well as the first $40 of a backpack or book bag purchase.

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