Back-to-school sales tax holiday this weekend

Published 11:27 am Tuesday, July 26, 2022

While one is already underway, Tennesseans have two more sales tax holidays to look forward to in the coming weeks.

The traditional “back-to-school” tax holiday will take place this coming weekend. Plus, the Tennessee General Assembly approved two other sales tax holidays this year that include food supplies and gun safety equipment.

Tennessee added an extra tax holiday weekend in August, focused on restaurant spending. “This year, we noted that consumers who have been cooped up at home might enjoy a sales tax holiday for purchases in restaurants, either dine in or take out,” State Representative Susan Lynn, chair of the Tennessee House Finance, Ways and Means Committee, said in an email.

Representative Lynn said Tennessee’s two holidays would cost the state about $25 million in lost revenue. (She noted that the holiday had been factored into the state budget passed in June, and that local governments would be made “whole” for local sales taxes lost during the tax-exempt periods.)

Back-to-school items like clothing, supplies and computers will be exempt from Tennessee’s 7 percent sales tax for 3 days, beginning Friday, July 29. Items sold online are also eligible. Items must be purchased for personal use, not for business or trade, according to the Tennessee governor’s website.

Items that are available to purchase tax-free are general apparel that costs $100 or less per item, such as shirts, pants, socks, shoes, dresses, etc, and school and art supplies less than $100 or less per item, such as binders, backpacks, crayons, paper, pens, pencils, rulers, paints, drawing pads, and artist paintbrushes.

Families with children in elementary and high school are expecting to spend on average of $864 on back-to-school clothes, supplies, electronics and other items this summer, up 24% from the $697 they figured to spend in pre-pandemic 2019, according to an annual survey by the National Retail Federation. Nearly two-thirds of families with children in kindergarten through 12th grade said they expected to buy computers and other electronics, up from about half last year, because of the potential for digital at-home classes.

Consumers appear to be cautious about spending and will only buy necessities. The higher prices on most consumer products, including high gasoline prices, caused by inflationary pressures and the war in Ukraine hurt the outlook. In addition, there is a fear of a recession that will hit us in the first two quarters early next year.

Sales tax holidays have been around for decades and in recent years have spread to cover everything from energy efficient appliances to hurricane preparation materials to guns, ammo and hunting supplies. But by far, the most common holidays are for back-to-school shopping.

While parents and politicians may like the holidays, some tax experts aren’t fans.

Someone buying a $30 backpack in a state like Tennessee with a tax rate of 7 percent would save $2.10. Despite the modest savings, people reliably turn out to shop, perhaps because they just like the idea of not paying taxes.

Certainly, these tax-free days should encourage families to do their back-to-school shopping at that time and save the tax money. Many children will be going back to in-person learning at school full time, since reports indicate that virtual schooling was not effective for many students.

This year’s tax-free weekend in Tennessee will begin at 12:01 a.m. Friday, July 29, and end at 11:59 p.m. on Sunday, July 31.