With tax-free weekends beginning soon, many back-to-school shoppers have the chance to avoid state sales tax on essentials such as shoes, clothing and school supplies. According to the Federation of Tax Administrators, 18 states currently participate in sales tax holidays, and other states, such as Indiana, have introduced bills to join them. But before heading out, it’s important to know how state rules apply to planned purchases to ensure the savings are worth the crowds.
Each state determines which categories and items qualify and how much shoppers can spend on each covered item before sales tax applies. This makes it crucial to check the state revenue department website for key information. Otherwise, you risk wasting time if needed items are actually part of the state’s exclusions or have very low limits.
For example, Maryland, Connecticut and Mississippi only include qualifying clothes and shoes in their July and August tax-free periods, with limits varying from $100 to $125 per item. Alabama, Ohio, West Virginia and other states also covering school supplies typically set limits between $20 and $100. However, a number of states allow $500 to $1,500 for computers.
Taking more general approaches, the Massachusetts Department of Revenue says shoppers can spend up to $2,500 on most retail items for personal use, and South Carolina sets no maximum for school supplies, computers, clothes and some accessories.
With state rules and tax rates in mind, review your lists to get a better picture of the potential savings. Taking advantage of the tax-free weekend in a state that covers an expensive computer or tablet can lead to significant savings. But if your state only covers clothing and you mainly need school supplies, it might be better to just wait for better deals outside the sales tax holiday. Additionally, even if the state tax savings seem worth it, be aware that local taxes could apply.
It’s still important to check prices at online and local stores and take advantage of promotions such as coupons and store rewards. You can also seek deals through online retailers in different states because the state sales tax waiver will still apply. Viewing ads online, installing price-comparison extensions on your web browser and using shopping apps can help maximize savings.
Finally, don’t forget to weigh the pros of the shopping spree with the cons of crowds and potentially long waits at the checkout. Saving $10 on sales tax might end up less appealing than waiting for a less stressful shopping experience. Skipping the tax-free weekend might also lead to less temptation to overspend just to save on sales tax.
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