Consumers to get sales tax holiday

Rick Wagner • Jul 28, 2007 at 12:00 AM

Office Depot Manager Jonathan Pierce checks a laptop display at the Kingsport store in preparation for Tennessee’s sales tax holiday. David Grace photo.


KINGSPORT - Budding school-age Picassos and their parents take heed: Art supplies have been added to Tennessee's Aug. 3-5 sales tax holiday.

And adult non-students can take advantage of the tax-free sales on art supplies and a range of other items, including computers, within limits. Virginia's holiday is similar except it does not include computers.

Tennessee's second annual sales tax holiday offers three full days of tax breaks for families preparing children to go back to school.

This past session the General Assembly expanded the sales tax holiday to include art supplies such as clay and glazes; acrylic, tempera and oil paints; paintbrushes for artwork; sketch and drawing pads; and watercolors.

"These sales tax holidays provide our students another means to excel in school," Gov. Phil Bredesen said in a news release.

From 12:01 a.m. Friday, Aug. 3, until 11:59 p.m. Sunday, Aug. 5, consumers may purchase selected clothing, school supplies and art supplies under $100 and computers $1,500 or less sales tax-free.

The event marks the second annual but the third tax holiday overall. The state had another holiday in April this year, approved by lawmakers on a one-time basis based on recent tax collections.

"Last year's inaugural holiday was extremely successful in giving back to Tennesseans, providing nearly $15 million in tax savings to Tennessee families," Revenue Commissioner Reagan Farr said in a release.

In addition to students and their families saving on back-to-school expenses, all Tennesseans can enjoy exempt items during the holiday, whether used by students or not. One exception, however, are computers used for business purposes.

"If Eastman Chemical Company was buying computers, we'd expect them to pay," explained state Rep. Nathan Vaughn, D-Kingsport.

Also, computer supplies, including memory devices, and printers and printer supplies, are not exempt in any case - unless bought by a school or other non-profit with a tax exemption certificate.

Also not on the list of exempt items are components such as monitors, keyboards and the like bought individually.

Exemptions aside, local retailers report that the first August sales tax holiday in 2006 was comparable to the Christmas shopping season.

Jeff Hostetler, owner of The Red Apple School Supply LLC in Kingsport, said the August tax holiday has proven to drive more of his business than the spring one.

"It's there at the back-to-school time. That just kicks in as a bonus," Hostetler said. He said the upcoming two days (he's closed on Sundays but open 10 a.m. to 6 p.m. Monday through Saturday) also expands the normal customer base.

"We saw a little (increase in the spring), but it wasn't that much," Hostetler said.

The business targets educational supply needs for educators and schools, as well as students.

"We aren't a mass discounter," he said, but a locally owned business set up to make buying supplies convenient and time efficient.

Andi Fleenor, assistant manager of the Office Depot at the East Stone Commons in Kingsport, said computers sell so well during the holiday that the chain is shipping in computers from Virginia stores, where the sales tax holiday does not include computers.

"They (customers) started looking and taking tickets here so they can decide what they want," Fleenor said. "Our sales at the last sales tax holiday (in August 2006) were at or above Black Friday (the day after Thanksgiving)."

She said college students buy during the sales tax holiday, too.

Over at the Fort Henry Mall, Manager Kevin Harmon said last year's August holiday weekend was comparable to Black Friday.

"I think it will be a bigger event this year. Last time, people started kind of slow. I think it will be quicker this time," Harmon said. "Back to school has been growing anyway by itself."

Even mall businesses selling items ineligible for the sales tax exemption are planning sales and discounts, Harmon said.

"They may not be able to participate, but they will offer discounts," Harmon said "It's sort of the perfect storm. It's going to be a big shopping weekend."

Tennessee businesses and consumers in the mall and elsewhere are not alone in reaping benefits from the sales tax holiday.

Neighboring Virginia also is having a sales tax holiday Aug. 3-5. The Commonwealth started its sales tax holiday in 2006, too, but its rules are different.

During the period, school supplies of up to $20 each are exempt, as are clothing items of up to $100 each.

However, neither computers nor computer supplies are included.

All told, Tennessee and Virginia are among 13 states and the District of Columbia in offering a sales tax holiday.

Those holidays scheduled Aug. 3-5 are in Alabama, New Mexico, North Carolina, Missouri, Oklahoma, South Carolina, Tennessee and Virginia.

Connecticut is Aug. 19-25, while Washington, D.C., is Aug. 4-12, Florida is Aug. 4-13, Georgia is Aug. 2-5, Iowa is Aug. 3-4 and Texas is Aug. 17-19.

Rules vary among the states.

"Consumers in five states - Georgia, Missouri, North Carolina, South Carolina and Tennessee - are also able to purchase computer equipment tax-exempt during this sales tax holiday," said Sophie Beckmann, a certified financial planner and certified public accountant at A.G. Edwards & Sons Inc. "While it may not seem like a lot, this could result in significant savings. In some states, this tax holiday could mean a savings of 6 percent or more."

Cumulative sales and local sales tax rates in the Tri-Cities are anywhere from 9.25 to 9.75 percent. In most of Southwest Virginia, the general sales tax rate is 4.5 percent.

Eligibility caps in states vary. In Missouri, for instance, Beckmann said clothing items priced at more than $100 and computer purchases of more than $3,500 are not considered qualified expenses, compared to the $100 and $1,500 caps in Tennessee.

"Before you go out shopping, do a little research and check your state's guidelines for this tax holiday," Beckmann said. "Knowing the items that are qualified expenses and the exact dates and times of the sales tax holiday may end up saving you a trip to a crowded mega-store."

Jason Mumpower, R-Bristol and House minority leader, said other states' successes with the tax holiday helped drive lawmakers to have the first one in Tennessee in August 2006.

"We had seen it work in other states. It had been a big hit," Mumpower said, adding that the April holiday may or may not be repeated in the future, but the back-to-school tax holiday likely will continue.

"I do think this will continue," Mumpower said.

Rep. Vaughn said the tax holiday enjoys deep bipartisan support.

"It's good for Tennessee, it's good for Tennesseans and it supports education," Vaughn said.

"This is such a popular program, there is no way that (discontinuation) could possibly happen."

Lt. Gov. Ron Ramsey, R-Blountville, has expressed support for the tax holiday but could not be reached for comment.

Rep. Jon Lundberg, R-Bristol, said he thought the added holiday was long overdue. He took office in January, after the first sales tax holiday in 2006, and unlike Ramsey, Mumpower and Vaughn, didn't get to vote to implement it.

"For years, the state has over-collected in taxes. It is time that we return some of this revenue to the hard-working people of Tennessee," Lundberg said.

"The people of this state have deserved this for a long time," Lundberg added, pointing to the state's surplus as a reason for the holiday being overdue. "I would encourage everyone to take advantage of this tax holiday. Citizens work hard and pay taxes all year; this is a reward for that hard work."

Lundberg said the April holiday was done by executive order but with the full support of the General Assembly.

"This (August sales tax holiday) is as close to permanent as you can get" in state government, Lundberg said. "I wouldn't say there'll be two every year."

However, Tennessee already has announced another sales tax holiday March 21-23, 2008, that would be in addition to the back-to-school tax holiday.

Vaughn said he hopes the success of the sales tax holiday and this year's half-percent rollback of the tax on food are stops on the way to a more substantial reduction in the tax on food.

"The state sales tax is definitely a regressive tax," Vaughn said, adding that taxing food puts an onerous burden "on the backs of poor people."

On the other hand, he said sales tax on food is a steady, stable source of funding for the state and its localities.

The state holds localities harmless on local option sales taxes not collected during the tax holidays, reimbursing them.

Shoppers and retailers can find more information about the Tennessee tax holiday at www.tntaxholiday.com, including lists of exempt items, frequently asked questions and more.

Assistance is available via e-mail at salestax.holiday@state.tn.us, and through a toll-free statewide telephone hot line by calling (800) 342-1003.

Out-of-state callers and those from the Nashville area can dial (615) 253-0600.

Hostetler said Tennessee has done a good job of providing answers to retailers and customers. For instance, he said confusion surrounds what are considered reference books and exempt from tax during the holiday, although most supplies bought for most schools are tax-free all the time.

Fleenor said Office Depot has a list posted in the store explaining the sales tax holiday to help consumers know what is and is not exempt.

The Tennessee Department of Revenue will provide call-center services throughout the three-day weekend, including extended hours on Saturday and Sunday.

For Virginia's sales tax holiday, consumers can go to www.tax.virginia.gov/site.cfm?alias=STHoliday for more information.

Both Web sites include detailed information and links to frequently asked questions and other information for consumers and retailers.

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