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Attention, tax-free shoppers

Sales_tax_holiday_iowa_2 Back-to-school time is creeping closer, and that means it's also time for several states to hold sales tax holidays.

If you live here in Texas, the Carolinas or Florida, you know the drill well. For years, these states have been telling retailers during these special events not to bother collecting sales tax on certain items. It's usually clothing and shoes, as well as some school supplies.

In some states, computers make it onto the tax-free list. But some other, more out-of-the ordinary products periodically show up at tax holiday time, too.

Connecticut, for example, is giving shoppers looking to improve their home's energy efficiency a break by exempting residential weatherization products from sales tax all the way through next June. And this last June, Florida authorized a special week so residents could buy hurricane supplies without added taxes.

This year, 14 states and the District of Columbia have authorized at least a weekend of no sales tax for their consumers. Most are the first weekend of August, but Florida's second sales-tax-free shopping period begins Saturday, July 22. And the nation's capital will hold its second sales tax holiday in late November/early December, just in time for Christmas shopping.

The participating states in 2006 are listed below. A click of the state's name will take you to its official site for details on what is and isn't tax-free during its holiday. Don't try to make sense of some of the lists; I'm convinced many of them were put together after a particularly long legislative day and/or a few drinks.

During Iowa's upcoming holiday, for example, if you buy a belt with a buckle, you pay no tax. But buy a belt sans buckle, or a buckle alone or a weightlifting belt (hey, I just read the lists and report back to you, folks), and be prepared to hand over 5% more.

Do your homework before heading to the mall: You also want to make sure you know the other limitations on tax-holiday purchases. Most states, in addition to maintaining specific item lists, also put caps on the prices of eligible products.

And while cities tend to (or are required to by the state) waive their local add-on sales taxes during the holiday period, a few jurisdictions still insist on collecting their few pennies regardless.

While I'm all for saving, be it on purchases or taxes, these holidays have the potential to cause financial pain alongside any tax-saving pleasure. Some people might be temped to overspend under the guise of saving a few dollars in taxes. Or they'll put so much on their credit card accounts that any tax savings will be eaten up by interest charges if they don't pay in full when the bill arrives.

As for the tax policy issues, I agree with the tax experts who roll their eyes at these holidays. They are primarily political gimmicks wrapped in the somewhat fraying banner of doing something for the kids and their sale-seeking parents. But shoppers, many of whom vote, seem to love them, and the nature of the political beast is that lawmakers occasionally do what the majority of the electorate wants.

You can read more about sales tax holidays, pro and con, in this story I did for Bankrate.com. It also links to a companion article where you'll  find the complete list of tax-free dates, along with a brief synopsis of each state's guidelines.

Bay State update (8/5/06): Since this post originally went up on July 21, Massachusetts lawmakers approved a sales tax holiday there. It happened while federal legislators were duking it out over the estate tax, and it slipped right past me.

A couple of readers were kind enough to bring it my attention, and Massachusetts now has taken its rightful place in the above list. Many thanks, Andy and Anali!

Sales tax "tag" graphic courtesy of Iowa Department of Revenue.   

Comments

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Gary

I'm okay with paying the taxes I have right now, but I don't want Obama to raise them again. I understand it's a part of life, but the government needs to cut back on spending before I'll pay more. Paying people like forestry consultants and firefighters I don't mind. But politicians who take more then they should bothers me.

The HVAC trainer

Amen! Glad to see this brought to the attention of the public (internet}. A great, well written, and detailed article. I hope to see more from you.

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