More states may provide sales tax holidays in 2021 and beyond
Updated May 26, 2021: Florida has enacted House Bill 7061; the three tax-free periods described below are a go.
A sales tax holiday for energy-efficient and water-efficient products will take place over Memorial Day weekend in Texas. As retailers prepare to suspend sales tax on qualifying items and consumers plan to take advantage of the tax savings, lawmakers in other states are deciding whether to offer tax-free periods of their own.
Arkansas has already expanded its annual sales tax holiday to include devices that can help students with remote learning, and Tennessee is moving forward with a tax-free period for food, food ingredients, and prepared food. More than a dozen other temporary exemption periods are under consideration. Read on for details.
The exemption provided during the annual back-to-school sales tax holiday in Arkansas has been extended to electronic devices because COVID-19 “has had a negative impact on education and access to quality education in the state.” As Senate Bill 181 explains, temporarily exempting electronic devices should “help prepare Arkansas students for virtual education programs that may need to be used in the upcoming school year due to the continuing pandemic.”
“Electronic device” includes:
- Cell phones
- Computer keyboards, monitors, and mouses
- Desktop computers and laptop computers
- Electronic books (ereaders)
The temporary sales tax exemption does not apply to devices, peripheral, or systems designed or intended primarily for recreational use; music or video players; televisions; or video game consoles, devices, or systems.
Two proposed sales tax holidays in California haven’t made much headway in the California Legislature, but they’re not dead yet. Assembly Bill 217 would establish a back-to-school sales tax holiday July 31–August 1, 2022. Assembly Bill 1121 would create a sales tax holiday for emergency preparation items in June 2022 and 2023.
Three proposed sales tax holidays in Florida have been enacted:
- A back-to-school tax-free period (July 31–August 9)
- A disaster preparedness holiday (May 28–June 6)
- A recreation tax-free period for admissions and supplies used to enjoy the entertainment options and natural beauty Florida has to offer (July 1–7)
House Bill 7061 became law on May 24, 2021, giving retailers little time to prepare for the tax-free period that starts May 28, 2021.
A measure introduced in Illinois would reduce the state sales tax rate for qualifying sales of clothing and school supplies made from August 1 through August 7, 2021. Under House Bill 603, the rate of tax would be 1.25% rather than 6.25%.
Lawmakers in Indiana introduced a bill that would establish a sales tax holiday for clothing, computers, and school supplies during the first seven days of August. However, the Legislature adjourned until November without enacting House Bill 1137.
To help stop the state from tumbling off a fiscal cliff in 2018, Louisiana lawmakers suspended the state’s three annual sales tax holidays through June 30, 2025. With state coffers now more full, if not overflowing, the Legislature is looking to reestablish at least two of the tax-free periods. In November 2020, it offered a one-time state sales tax holiday for the first $2,500 of the sales or cost price of most consumer purchases of tangible personal property, though local sales tax still applied.
Louisiana previously provided temporary sales tax exemptions for hurricane preparedness supplies (May), school supplies (August), and guns and ammunition (September). House Bill 6 would reestablish the sales tax holiday for hurricane-preparedness items. The state sales tax exemption would apply to the first $1,500 of the sales price of items that qualify for the annual sales tax holiday as provided in RS 47:305.58, including carbon monoxide detectors, cell phone batteries and chargers, and gas or diesel fuel tanks.
House Bill 9 would repeal the one-time November 2020 tax-free period and amend and reestablish the Second Amendment Weekend Holiday. Previously held in September, it would take place during the last consecutive Saturday and Sunday of July in 2021 and subsequent years. If the measure becomes law, state and local sales and use tax won’t apply to the first $2,500 of the sales price of cost of any consumer purchases of ammunition, firearms, and hunting supplies. Interestingly, the exemption would only apply to purchases made from a physical retail location in the state — not online sales.
Senate Bill 153 seeks to establish economic nexus and require certain out-of-state sellers and marketplace facilitators to collect and remit sales tax. The measure would also clarify and amend certain aspects of the state’s sales tax holiday. For example, layaway sales would qualify for an exemption only if:
Final payment on a layaway order is made, and the buyer takes ownership of the property, during the exemption period (aka, sales tax holiday); or
The purchaser selects the property, and the seller accepts the order for the property during the sales tax holiday, for immediate delivery upon full payment, even if delivery is made after the exemption period.
There are no sales tax holidays in New Jersey currently, but at least three have been proposed. None have made much headway in the Legislature.
Senate Bill 1776 and Assembly Bill 1455 both seek to establish an annual sales tax holiday during the first weekend of August. The temporary exemption would apply to certain retail sales of the following products if sold to an individual purchaser for non-business use:
- Computers and school computer supplies
- School art supplies
- School instruction materials
- School supplies
New Jersey Assembly Bill 3343 would establish an annual sales tax holiday for certain retail sales of water-efficient products during the third weekend of July.
Assembly Bill 3866/Senate Bill 2307 would establish both a sales tax credit and a sales tax holiday for small businesses, defined as any business independently owned and operated that has fewer than 100 employees. The proposed “exclusion period” refers to “the period of time following the Governor’s public declaration of emergency pursuant to Executive Order No. 103 of 2020 until it is determined by the Governor that the emergency no longer exists.” As of this writing, lawmakers are looking to end some aspects of the public health emergency.
Lawmakers in the Empire State are considering a sales tax holiday for water-conserving products. If either Assembly Bill 6308 or Senate Bill 1166 is enacted, certain water-conserving products would be exempt from New York sales tax during Memorial Day weekends every year — though it’s likely too late for 2021.
North Carolina lawmakers are looking to reestablish the state’s annual sales tax holiday, which was eliminated in 2013. Senate Bill 182/House Bill 377 would restore the August sales and use tax holiday for school supplies as it existed immediately before its repeal. If enacted, the tax-free period would resume this year and would run the first Friday of August through the following Sunday (August 6–8).
Similar to last year, Tennessee will provide a sales tax holiday for retail sales of food, food ingredients, and prepared food (excluding alcohol) this summer. The new tax-free period will run concurrently with the state’s annual sales tax holiday but will outlast it: The annual tax-free period for clothing, computers, and school supplies runs July 30 through August 1; and the food sales tax holiday runs July 30 through August 5.
Lawmakers in the Volunteer State are also still considering a small business sales tax holiday during the 2021 Labor Day weekend.
Information about upcoming tax-free periods can be found in this state-by-state guide to 2021 sales tax holidays.
The 2021 sales tax changes report: midyear update
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