August 2011 Summer Tax-Free Days

Don’t you love vacation time? Well, you’re not the only one getting a vacation. Some states are giving their taxes a vacation, too. Sounds preposterous?

Not at all! Everyone’s always complaining about sales taxes. So some states offer a brief vacation from sales taxes on certain purchases each summer. Does your state offer one?

17 states offer some sort of holiday – most of them during the month of August. You can find the master list over here: http://www.taxadmin.org/fta/rate/sales_holiday.html

Louisiana has three tax vacations – one before hurricane season, one for back to school, and one for hunting season.

Virginia offers a big break in October on up to $2,500 of Energy Star purchases. Maryland and Texas offer big breaks on Energy Star appliances, also for air conditioning equipment, to get ready for summer. But we missed those opportunities this year. Mark your calendar for next May in Texas and February in Maryland.

Some states have the foresight to exempt the cost of computers from sales taxes. You’ll find those opportunities in Alabama, Missouri, New Mexico, North and South Carolina, and Tennessee.

On the other hand, the amounts exempt from sales tax in some states (like, Maryland, Mississippi, Texas and Virginia) are sometimes quite minor. For instance, Florida exempts $15 of school supplies and $75 worth of books and clothing. Several states go as high as $100 of exempt merchandise. Hardly worth leaving the house to save $5 – $10. You can save that much by using coupons wisely, all year-round, rather than waiting for the 2-3 days of tax holidays.

You wonder why the states even bother with making their merchants go to all the trouble to do the extra bookkeeping. Talking to one merchant several years ago, he explained that it cost him thousands of dollars to reprogram the cash registers in each of his stores to track the exempt sales. If these holidays were meant to stimulate sales, they weren’t working. The rules are too rigid about which merchandise isn’t taxed and which is.

It’s hard enough for the merchants to track, but think of the poor customers who come up to the cash register expecting to avoid paying sales tax on some school supplies – only to be told they’ve exceeded their $15 allotment. Or they selected the wrong supplies.

Are sales tax holidays a good idea? Or more trouble than they are worth?

You tell us. You have some sales tax holidays coming this month. Try them out in your state and let us know what you think.

Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.