As retailers gear up for their annual back-to-school sales, parents and students might want to wait until next week to shop so they can get an extra 6.35 percent off.
Connecticut will conduct its 12th annual Sales Tax Holiday week next week, beginning on Sunday and running through Saturday. The seven-day holiday exempts only individual items of clothing and footwear priced under $300 from the state sales tax, which was increased last year to 6.35 percent.
Also, for the second straight year, the tax-free week applies to a broader array of clothing items and shoes because the legislature last year removed the sales tax exemption for items under $50. Before the change, consumers weren’t charged the sales tax for items under $50, so the tax holiday didn’t affect those items.
The debate continues, though, over whether the sales tax holiday has much benefit for either consumers or retailers.
According to the National Retail Federation, the average family will spend an estimated $688.62 in back-to-school shopping this year, a 14 percent increase from $603.63 last year. Families are expected to spend about 36 percent of this year’s total — an average of $246.10 — on clothing and shoes, the federation said.
School supplies — such as backpacks, notebooks, pens and pencils, and electronic items such as calculators or iPads — are excluded from the state’s sales tax holiday.
Connecticut is one of just 18 states offering a sales tax holiday this year, and joins Massachusetts, which earlier this month reinstated it, as the only New England states to offer it. Connecticut also joins Maryland as the only states offering the holiday for a full week. The other 16 states offer the tax break only as a weekend-long event; Massachusetts held its holiday last weekend.
Commissioner Kevin Sullivan of the state Department of Revenue Services said that while the state gave up an estimated $6.7 million in sales tax revenue last year, and expects to forfeit between $6 million and $7.5 million in sales tax revenue during the tax holiday this year, there is a benefit.
“That’s $110 million to $120 million in sales, which is good for the economy,” Sullivan said. “What happens is that a lot of retailers will use this occasion to deeply discount items. So the taxpayer gets not only the virtue of the sale, but also the tax exemption.”
Sullivan said consumers also buy items that are not tax exempt in addition to buying the tax-free items.
“It puts money back into the economy, so we believe it’s a good investment,” he said.
The Tax Foundation disagrees. The Washington, D.C.-based organization says the holiday does not amount to “meaningful tax reform.”
“Ultimately, it comes down to why states think they want to do them,” Joseph Henchman, the foundation’s vice president of state projects, said of sales tax holidays. “If it’s about helping low-income people access school supplies, there are better and more effective ways to do it. If the desire is to reduce taxes, just reducing them for people who happen to take advantage (of the holiday) for one week or weekend isn’t worth it.”
Gov. Dannel Malloy attempted to have the legislature cancel the holiday during last year’s session. Asked about that effort, the governor’s spokesman, Andrew Doba, responded via email that “as with any budget negotiation, there’s always a give and take. The governor and the legislature agreed on a budget after making a number of tough choices.”
He then added that Malloy hopes “Connecticut families take advantage of sales tax-free week as they gear up for the coming school year.”