17 states are rolling out sales-tax holidays just in time for the back-to-school shopping season.
NEW YORK (CNNMoney) -- As summer vacation comes to a close, several states are offering shoppers tax breaks on back-to-school items.
So far this year, 17 states have announced sales-tax holidays in the weeks leading up to September on everything from clothing to computers to backpacks.
The extra 4% to 7% savings might help ease the average family's expected splurge of $688 for the coming school year, according to the National Retail Federation.
But buyers should read the fine print before heading out to the stores. Each state waives sales tax only on specific items and imposes varying limits for how much shoppers can spend tax-free on those items. For example, in Virginia, eligible tax-exempt "clothing" includes disposable diapers and shoe insoles, but not handbags or sunglasses, and it only applies to items valued at $100 or less.
New York was the first state to offer a sales-tax holiday in 1997 in an effort to stop residents from traveling to nearby states to buy tax-free clothing, said Joseph Henchman, the vice president of state projects at the Tax Foundation. The plan didn't offer any substantial relief to the state or shoppers, he said, and New York has not held an official sales-tax holiday since 2006 (though clothing and footwear sold within the state is currently always sales tax-exempt for items up to $110).
But other states adopted the practice, and some have expanded to three weekend holidays a year, offering discounts on hurricane-preparedness equipment, energy-saving appliances -- even firearms.
Henchman sees less value in the holidays for penny-pinching families than for politicians.
"For the most part, it's a gimmick," he said. "It's a way for politicians to say that they've attached tax relief that really doesn't cost a lot and doesn't really reduce tax burdens, but can get a lot of favorable publicity."
While the savings may be marginal, sales tax holidays draw big crowds and sometimes even out-of-state shoppers, said Rachelle Bernstein, vice president and tax counsel at the NRF.
"What we've seen through our members is these sales tax holidays will drive more people into a store even if it's a 6% to 10% savings," she says.
That extra foot traffic can mean more revenue for stores -- and the state, when people decide to buy items that cost more than the tax-free limit within a category. In Florida, for example, shoppers will only receive tax exemptions on items marked at or below $15.
"It's a win-win for the states," Bernstein says.
Mississippi's sales-tax holiday was held this past weekend, but August brings 16 more tax-free opportunities. Georgia renewed its tax holiday after a two-year suspension because of state budget concerns, and Massachusetts may approve an August sales-tax holiday, bringing the total number of participating states to 18, Henchman says.
Carlos Rodriguez is trying to rid himself of $15,000 in credit card debt, while paying his mortgage and saving for his son's college education.
Overnight Avg Rate | Latest | Change | Last Week |
---|---|---|---|
30 yr fixed | 3.80% | 3.88% | |
15 yr fixed | 3.20% | 3.23% | |
5/1 ARM | 3.84% | 3.88% | |
30 yr refi | 3.82% | 3.93% | |
15 yr refi | 3.20% | 3.23% |
Today's featured rates: