Tennessee tax holiday set for this weekend

Hank Hayes • Apr 24, 2007 at 11:24 AM

Tennessee's second-ever sales tax holiday - a retail event popular with consumers and politicians but unpopular with policy critics - starts at 12:01 a.m. Friday and ends at 11:59 p.m. Sunday.

State officials, including Gov. Phil Bredesen, are encouraging consumers to visit retailers and take advantage of the sales tax holiday.

During this designated three-day weekend, consumers may purchase selected clothing, school supplies and computers without paying Tennessee's state and local sales tax on the items. Clothing and school supplies $100 and under and computers that cost $1,500 or less are exempt from tax during the holiday.

Sales taxes in Tennessee, with the state and local shares combined, approaches 10 percent on most purchases.

The National Conference of State Legislatures (NCSL) suggests that sales tax holidays are growing in popularity as a policy tool because revenue performance continues to be stronger than anticipated in most states. Largely due to higher-than-expected revenue performance, state lawmakers in 42 states have additional resources available for distribution in fiscal year 2007, fiscal year 2008 or both, according to NCSL.

But people like Jonathan Williams, a staff economist with the Washington, D.C.-based Tax Foundation, are not big fans of sales tax holidays.

Williams claimed the state's last back-to-school sales tax holiday saved the average Tennessean $2.51.

"Some holiday. Residents may be out of town, they may be working on Friday or Saturday, or they may not have enough cash on hand to splurge during those two days," Williams said in a column written last fall. "Taxes should treat all customers equally at all times; not only those who can afford it, or whose schedules permit. Not only do tax holidays fail to live up to their advertising, they generate numerous problems.

"For one, sales tax holidays essentially allow the government to artificially influence the timing of purchases. By doing so, the government places itself in the business of deciding economic winners and losers - a function that should always be the sole responsibility of the free market. ... Considering the practical and the economic problems with sales tax holidays, why are they so popular? For starters, politicians love them. Tax holidays are an easy way for our elected officials to be seen as tax cutters - even if the tax relief is paltry."

All details about Tennessee's sales tax holiday are available at www.tntaxholiday.com.

Assistance for consumers is available via e-mail at Salestax.holiday@state.tn.us and through a toll-free statewide telephone hot line by calling 1-800-342-1003. Out-of-state callers should dial (615)253-0600. The Tennessee Department of Revenue will provide consumers its call-center services throughout the three-day weekend, including extended hours on Saturday and Sunday.

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