This weekend, Aug. 10 and 11, the sales tax holiday for back to school shopping returns to Georgia.
Enormously popular with shoppers and retailers, the sales tax holiday for back to school shopping was held in Georgia from 2002-09.
The holiday provides much-needed tax relief to families struggling to outfit their children for the new school year. In an important sales season, it also provides retailers with an economic stimulus.
The energy-efficient appliance holiday sales tax holiday was held from 2005-09 and also returns this year from Oct. 5-7.
Both of these sales tax holidays were included in HB 386, the comprehensive tax-reform bill proposed by the Special Joint Committee on Revenue Structure and passed this session by the state legislature.
During the back to school holiday, the following items will be exempt: clothing, including footwear, with a sales price of $100 or less per item (the exemption excludes accessories such as jewelry, handbags, umbrellas, eyewear, watches and watchbands); computers – single purchases, with a sales price of $1,000 or less, of personal computers and personal computer-related accessories designed for recreation use; school supplies — general school supplies to be used in the classroom or in classroom-related activities with a sales price of $20 or less per item. This does not include books (except children’s books, dictionaries and thesauruses), medical supplies, briefcases or envelopes.
The exemption does not apply to items used in a trade or business or for resale, or rentals; or sales in theme parks, entertainment complexes, public lodging establishments, restaurants or airports.
In 2011, the Federation of Tax Administrators reported that 17 states, including all of the states surrounding Georgia, had back to school sales tax holidays. South Carolina had no spending limits on the items exempted.
Several studies suggest that sales tax holidays provide economic benefits for the state and its citizens. It is well known that a community with lower local sales taxes tends to be associated with increased consumer spending. In 2011, when Georgia did not have a sales tax holiday, sales taxes were lost to Tennessee during their sales tax holiday weekend of Aug. 5-7.
Although some of the benefits of sales tax holidays go to retailers, the lion’s share of the tax relief, about 80 percent, goes to consumers.
Because consumers view the tax relief as an important incentive to shop during these holidays, store traffic increases. In most of the states that have such a holiday, this period has become the second- or third-most important sales weekend, after the weekend before Christmas and the day after Thanksgiving.
Although it is predicted that this year’s back to school sales tax holiday will cause Georgia to lose between $32 and $45 million in state revenue and local governments to lose between $23 and $32 million, some studies actually contradict this and say that the holiday can be neutral or actually increase revenues by increasing sales of non-exempt items as well as direct and indirect effects.
One study has shown that the re-authorized sales tax holiday in Georgia could generate a significant $475.8 million in economic activity including direct and indirect effects such as more jobs and labor income. This could result in over $84 million in fiscal revenues to be evenly divided between the state/local and federal governments.
The study concluded that the increase in economic activity could generate $5 million in state and local taxes beyond the revenue that would be lost to the tax holiday exemptions.
Regardless of the impact to state and local coffers, there is no denying that the back to school sales tax holiday offers Georgia’s citizens much-needed savings, particularly in these tough economic times.
Welcome back, sales tax holidays! Now this weekend let’s take advantage of it and shop till you drop.
Sen. Buddy Carter can be reached at Coverdell Legislative Office Building (CLOB) Room 301-A, Atlanta, GA 30334.
His Capitol office number is (404) 656-5109.You can connect with him on Facebook at facebook.com/buddycarterga orfollow him on Twitter @Buddy_Carter.