Shoppers And Stores Gear Up For Tax Holiday

By Gary Gray
Reporter / Bristol Herald Courier
Published: July 25, 2008

Tennessee and Virginia consumers will get a break on back-to-school purchases Aug. 1-3 when taxes on some clothing, supplies and other goods are dropped from sales receipts.

Cash-strapped teachers also will get a break during the tax holiday as many have to pay for basic supplies out of their own pockets because of shrinking school system budgets.

But all consumers – whether they are parents, teachers, accountants or truck drivers – are welcome to take advantage of the tax breaks, as long as they buy qualified items. 

The annual tax holiday in both states begins at 12:01 a.m. Friday, Aug. 1, and ends on Sunday, Aug. 3 at 11:59 p.m. Lee and Teresa Thomas, of Bristol, Tenn., were running errands on Thursday when they were asked about the upcoming tax holiday. They have three children, two are in preschool and one is in fourth grade.

“We’ve been taking advantage of the tax holiday since 2006, and the savings is worth it,” Lee Thomas said. “Anytime you can save money it’s worth it.”

The couple said they generally buy in bulk during the tax-exempt weekend for two reasons. First, buying more notebooks, pencils or crayons at one time means they don’t have to return to stores for a while. Second, their main purchases are clothing, which means with children close in age, a coat or a pair of shoes can sometimes be handed down while the item is still in relatively good shape.

Over the weekend, all consumers in Tennessee can purchase items totaling $100 or less tax-free, such as clothing, including jeans, jackets, dresses, socks and shoes.

School and art supplies, including paper, pens, crayons, lunch boxes and notebooks, also can be purchased tax-free if the total amount is $100 or less. 

Computers with a price tag of less than $1,500 also can be purchased without paying sales taxes. However, accessories purchased separately, such as speakers and monitors as well as software, are not tax-exempt.

“We don’t sell computers, but we do sell a lot of binders, paper and pencils,” said Bill Wilmoth, manager of Big Lots off Volunteer Parkway in Bristol, Tenn. “Sales definitely jump during that weekend, but our school supply sales have been up all through July.”

The start of a new school year also draws teachers to the store, Wilmoth added.

“I have so many teachers in here – the school board is short on funds and teachers come in and buy loads of pencils, notebooks, the essentials,” he said.

Items sold via mail, telephone, e-mail or the Internet also may qualify if the order is paid for and processed during the exemption period.

Tennesseans will get a tax break of 9.25 percent, which is the combination of the 7 percent state tax and 2.25 percent local sales tax.

So the savings on $100 worth of tax-exempt items is $9.25, and the savings on a $50 purchase is $4.63.

The tax exemption is based solely on the purchase of items that qualify for the holiday, and no identification or certificate is required.

There’s also no limit on the number of items that may be purchased as long as the purchase price of each of those items is below the threshold provided in the law.

Tennessee residents are expected to save about $10 million during the three-day period this year, compared to $14 million in 2007 and $15 million in 2006, according to the Tennessee Legislative Budget Analysis Office.

Factors causing the savings amounts to decline over the years include the U.S. economic downturn and the fact that many shoppers may have purchased more items last year or the year before than they planned to use at that time, according to the state office.

During the same three-day period in Virginia, purchases of certain school supplies, clothing and footwear are exempt from Virginia sales tax.

Under Virginia law, the tax on purchases of all items other than food is 5 percent.

Each eligible school-supply item must be priced at $20 or less, and each eligible article of clothing and footwear must be priced at $100 or less.

The actual savings are less in Virginia because the tax is lower. A $20 purchase saves consumers $1; a $100 buy saves $5.

“The price of school supplies is outrageous,” said Darren Berkley of Bristol, Va., who was shopping at Office Depot off Interstate 81’s Exit 7. “I have a son, Josh, who’s entering his junior year at the University of Tennessee, so back-to-school applies to older students, too, and we [he and his wife] are paying for it.”

Berkley’s son goes through plenty of art supplies, including sketch pads, so when tax holidays come around the purchases are usually made in bulk.

“Anything you can save is huge, because it seems like we’re continually buying something,” he said.

In Virginia, articles of clothing include any apparel or footwear intended to be worn on the human body. Tax-exempt clothing does not, however, include accessories, sporting equipment or footwear designed primarily for athletic activity.

Tax-free school supplies do not have to be used in school or school activities, but the items are limited to goods commonly used by a student, including art supplies, instructional materials and school music supplies.

One of the major differences in the tax holidays for the two states is that Virginia does not exempt computer systems from taxes.

In January, a bill was introduced to the Virginia General Assembly that would have added computers costing up to $1,500 to the list of tax-exempt items this year. The House vote on Feb. 7 was 99-0 for the addition. But the bill has been sitting in the Senate Finance Committee since late February.

Virginia residents are projected to save about $4 million this year, according to Virginia Department of Taxation officials. Figures for past years were not available.

Tracey Yates, a former fourth-grade teacher in Washington County, Va., was loading groceries into her vehicle on Thursday at the Wal-Mart, also off Exit 7.

“I actually drove all the way to Gatlinburg last year because they have outlet stores there, so prices are already reduced,” she said of last year’s tax-exempt period. “I bought supplies for my classroom, and I’ve always had to buy chalk, pencils and crayons. So, as for school supplies – yes, the tax holiday is awesome.”

In both states, out-of-state residents can take advantage of the tax savings. However, when property purchased without the payment of sales taxes in Virginia is exported for use in other states, a use tax may be applied.

Items purchased at Virginia businesses via the Internet that qualify will be exempt from taxes if the item is delivered to and paid for by the customer.

Currently, 15 states have sales tax holidays, with the highest tax breaks given on computers in North Carolina and Missouri, according to the Federation of Tax Administrators in Washington, D.C.

| (276) 645-2512

For detailed information on tax-free items, layaway sales, exchanges, terms, returns, shipping and handling charges and other information, call the Tennessee Department of Revenue at (800) 342-1003, or visit http://www.tntaxholiday.com. Similar information is provided by the Virginia Department of Taxation at (804) 367-8031 or by visiting http://www.virginia.tax.gov

Back-to-school shopping/saving tips

* Do a closet inventory – Before counting out last season’s garments, check the closet to see if those khaki pants or that T-shirt still fit and are in good shape.

* Set a spending plan – Make sure you have your shopping list in hand. Without a pre-determined list of needed items, you could be asking for trouble.

* Involve your children – Back-to-school shopping provides an excellent opportunity to teach your children concepts like comparison shopping, distinguishing needs from wants and sticking to a budget. 

* Look for deals year-round – Nothing says your children must start the first day of school with a closet full of new outfits. Buy the necessities prior to the first day of school and then keep an eye on sales and other bargains throughout the year.

Source: Virginia Society of Certified Public Accountants