Take a summer vacation from taxes © Big Cheese Photo/SuperStock

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Take a summer vacation from taxes

Initially intended as back-to-school incentives, the temporary suspensions of state sales taxes are expanding to more places and products and being extended.

By SmartMoney

For savvy shoppers across the U.S., a sales-tax holiday is an annual event worth waiting for, and this year is no exception.

Each summer, more than a dozen states temporarily suspend sales taxes on certain products, such as clothing, computers and school supplies. The concept: Soften the blow of back-to-school costs for parents while boosting sales for local retailers. Consumers' savings can amount to discounts of up to 10%.

With rising fuel and food costs weighing heavily on Americans' budgets, some states are now taking their sales-tax holidays a step further by extending the time periods and broadening the scope of eligible products.

The resulting economic stimulation, states hope, will more than offset the loss of tax revenue, explains Richard Ebeling, a senior research fellow with the American Institute of Economic Research, a think tank.

"For those few days, consumers are going to get more for their dollar," he says. "That's more in your pocket to spend on other things, like gas or groceries."

15 states and D.C. join in

Newcomers Vermont, which kicked off tax-free season in mid-July, and West Virginia have brought the tally of states offering tax holidays this summer to 15, plus the District of Columbia.

If you live in or near a state offering a sales-tax holiday (see the table below), here are the best ways to take advantage of this temporary tax reprieve:

  • See whether the holiday applies to local taxes, too. Most states leave it to cities and counties to decide whether they will waive local taxes in addition to the state sales taxes. Jefferson County, Ala., for example, is suspending its 1% sales tax but not the additional 1% levied for county school districts. In Missouri, cities including Branson and Jefferson City declined to waive any local taxes (4.375% and 2.975%, respectively), as have more than 50 counties, which say they need the tax revenue. Check with your state tax commission to see what your city offers before you hit the local mall.

  • Check for exemptions. Find out which items the tax holiday excludes before putting together a shopping list. New Mexico, for example, specifically excludes athletic apparel in its definition of clothing, while Washington, D.C., permits "any article of apparel for humans." North Carolina even throws in disposable diapers.

  • Review your receipts. Major chains can easily adjust their registers to account for the sales-tax holiday, but local shops may have a tougher time, says J. Craig Shearman, a spokesman for the National Retail Federation, a trade group. Review your receipts to ensure that you don't get overcharged.

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  • Skip the stores. Shop online when your state is having a sales-tax holiday. Any retailer that charges sales tax for purchases shipped to your state must waive it, as long as the order is processed within the holiday time period.

Mark your calendar with these remaining 2008 dates for a sales-tax holiday near you:

 
StateHolidayTax savings*Eligible products (cost is per item unless otherwise noted)

Alabama

Aug. 1-3

4%

Books worth $30 or less. School supplies worth $50 or less. Clothing worth $100 or less. A single purchase of a computer, software and/or computer accessories with a combined value of $750 or less.

Connecticut

Aug. 17-23

6%

Clothing and footwear worth $300 or less.

Georgia

July 31-Aug. 3

4%

School supplies worth $20 or less. Clothing and footwear worth $100 or less. A single purchase of a computer, software and/or computer accessories with a combined value of $1,500 or less.

Georgia

Oct. 2-5

4%

Energy-efficient and water-saving products worth $1,500 or less.

Iowa

Aug. 1-2

5%

Clothing worth $100 or less.

Louisiana

Aug. 1-2

4%

All "tangible personal property" -- except vehicles, meals and services -- worth $2,500 or less. (For more details, click here.)

Missouri

Aug. 1-3

4.23%

School supplies worth $50 or less. Clothing worth $100 or less. Computers, software and computer accessories worth $3,500 or less.

New Mexico

Aug. 1-3

5%

School supplies worth $15 or less. Clothing worth $100 or less. A single purchase of a computer, software and/or computer accessories with a combined value of $1,000 or less.

North Carolina

Aug. 1-3

4.25%

Sports and recreational equipment worth $50 or less. School supplies and clothing worth $100 or less. Software, computer accessories and other computer supplies worth $250 or less. Computers worth $3,500 or less.

Oklahoma

Aug. 1-3

4.50%

Clothing worth $100 or less.

South Carolina

Aug. 1-3

6%

Purchases of any price in specific categories, including clothing, footwear, accessories, school supplies, computers, software, computer accessories, bed linens, bath towels and pillows. (For a full list, click here.)

Tennessee

Aug. 1-3

7%

Clothing and school supplies worth $100 or less. A single purchase of a computer, software and/or computer accessories with a combined value of $1,500 or less.

Texas

Aug. 15-17

6.25%

Clothing and backpacks worth $100 or less.

Virginia

Aug. 1-3

4%

School supplies worth $20 or less. Clothing worth $100 or less.

Virginia

Oct. 10-13

4%

Energy-efficient products worth $2,500 or less.

Washington, D.C.

Aug. 2-10

6%

Clothing and school supplies worth $100 or less.

Washington, D.C.

Nov. 21-Dec. 2

6%

Clothing worth $100 or less.

West Virginia

Sept. 1-7

6%

Energy-efficient products worth $2,500 or less.

*State tax only. Local taxes may or may not be waived, depending on location.

This story was reported and written by Kelli B. Grant for SmartMoney.

Published July 31, 2008

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