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SALT TALK: Who Needs a Vacation When You Can Take a Sales Tax Holiday?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 5, 2019 11:50:20 AM
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There are a countless number of songs about summer holidays; summer vacations, summer romances, the beginning of summer, the end of summer and even rainy summers. Yet I could not find a single song referencing the long awaited once a year sales tax holiday season.

What does a sales tax holiday encompass? Most often the holiday is an annual event occurring just prior to the back to school season, which provides exemptions for popular back to school items such as clothing, school supplies, and the like. While some credit New York for starting the trend back in 1997, the State has jumped off the train some years back and instead lets you “Enjoy a New York State Sales Tax Holiday Every Day on Clothing and Footwear Sold for Less than $110[1].” It should be noted that only New York City and a handful of other counties have opted in, so you might still need to pay a portion of the sales tax.

Way back when, before New York established such a generous exemption, droves of Moms and Dads would drive to New Jersey, where clothing is exempt from sales tax, to stock up on back to school clothing. Not wanting New York merchants to lose the business and wanting to make future state voters happy (Can you imagine anything worse than the summer coming to an end and having to sit in the car for two hours in traffic each way to drive to Paramus with both of your parents, forcing you to try on clothing!) the holiday began.

While New York has opted out, currently eighteen states have enacted some type of “holiday” savings. Established first in 1999, Texas begins its holiday August 9th and exempts clothing, backpacks and school supplies with a cost up to $100. Massachusetts has the most generous program I am aware of. It begins August 17th and ends August 18th. The break applies to purchases under $2,500 and includes almost all tangible personal property one can think of other than tobacco, marijuana, alcohol, cars, and motorboats. Mississippi certainly has the most unique program. Clothing and footwear up to $100 were exempt July 26th and 27th but another holiday beginning August 30th and ending September 1st will take place exempting firearms, ammunition and hunting supplies.

Other than the merchandise offerings, the concept of the sales tax holiday is not loved by all. Some tax administrators and professionals argue they are disruptive and inefficient. While I may not agree with the savings strategy, any time I can help a child already despondent about the end of his or her summer holiday, avoid a drive to Paramus, I’m happy.

If you have questions contact me at wberkowitz@berdonllp.com or your Berdon Advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

[1] See the Department of Taxation and Finance Website at https://www.tax.ny.gov/press/rel/2018/backtoschool080918.htm

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