Posted by Tiffany Gaskin

What You Need to Know About Tax-Free Holidays

What You Need to Know About Tax-Free Holidays

Tax-Free holidays provide a reduction in sales tax and can be a great way to save back to school this year.

You will usually find that the price of your items will increase when you get paid, but for a limited time, retailers are eliminating the additional tax they charge you.

All resellers must participate, which means they cannot collect tax on qualifying items during the official tax exemption.

However, the dates this occurs vary by state, and some holidays last longer than others.

The holidays can also apply to various retail sectors, from clothing to electronics and school supplies.

However, not everyone is eligible for the exemption, so you will need to check the regulations in your place of residence.

Items should also be for personal use, which will prevent businesses from taking advantage of discounted products.

In most cases, meals and food usually do not qualify for the discount, but you should order products online during the event that will qualify for the reduced price.

This happens if the purchase is made during the holiday period, but it does not matter if your item will be delivered later.

Also called taxes, these special weekend or weekly events exclude sales tax for certain categories, typically back-to-school-related items, such as computers, clothing, accessories, and sports equipment. 

The best news? You don't have to be a resident of the state to enjoy a tax-free economy.

 

What is a tax holiday?

A tax holiday, aka a weekend or tax-free week, refers to a period during which qualifying items are exempt from sales tax. Some states celebrate duty-free holidays every year, and some even have more duty-free events throughout the year. Most states participating in tax holidays host an event in the summer that aligns with back-to-school shopping.


Do tax-Free Weekends include online sales?

Yes, online purchases made by residents of the state during the sales tax holiday will be exempt from tax, even at major online retailers such as Amazon. Ensure to follow your state's instructions for qualifying items.


What happens if I purchase an eligible item that exceeds the dollar limit?

It varies by state. For instance, in Maryland, the first $40 spent on a backpack is tax-exempt. If you spent $60 on your backpack, you would only pay $20. However, if you exceed the price limit ($2,500 for all qualifying purchases) in a state like Massachusetts, the entire item will be subject to tax to sell. We advise that you review the full list of basics and rules to plan accordingly.


Do all cities in a state participate in tax holidays?

Most states require all towns and businesses in the county to participate in tax-free holidays. Alabama, Florida, and Missouri do not.


Can I Save Money by Shopping During Tax Holidays?

Yes, you can. You can save money by avoiding sales taxes on a tax holiday, especially in high-rate states like Alabama (9.22%), Arkansas (9.51%), and Tennessee (9.55%). That being said, you'll want to make sure you're on a budget to avoid overspending and look for back-to-school deals. Some stores may have lower prices for clothing, supplies, and computers than you would get by paying full price during a tax holiday.

Sales tax-free States include: 

  • Alaska

  • Delaware

  • Mountain

  • New Hampshire

  • Oregon

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Tiffany Gaskin
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