It’s back! This weekend, the sales-tax holiday for back-to-school shopping returned to Georgia.
Enormously popular with shoppers and retailers, the holiday, which ran Aug. 10-11, was held in Georgia from 2002-2009.
The holiday provided much-needed tax relief to families struggling to outfit their children for the new school year. In an important sales season, it also provided retailers with an economic stimulus.
The energy-efficient appliance sales tax holiday, which was held from 2005-09, also returns this year from Oct 5-7. Both holidays were in House Bill 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 were exempt: (1) 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; (2) Computers — single purchases with a sales price of $1,000 or less, of personal computers and personal computer-related accessories designed for recreation use; (3) School supplies — general 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 did not apply to items used in a trade or business, resale, 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. 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 sale- 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 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 contradict this and say that the holiday can be neutral or actually increase revenues by increasing sales of nonexempt items as well as direct and indirect effects.
One study has shown that the re-authorized sales-tax holiday in Georgia could generate $475.8 million in economic activity, including direct and indirect effects such as more jobs and labor income. This could result in more than $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! I hope you took advantage of it and shopped till you dropped.
Carter can be reached at Coverdell Legislative Office Building (C.L.O.B.) 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 or follow him on Twitter @Buddy_Carter.