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Fourth annual Sales Tax Holiday
boosts back-to-school sales

Three Days: No Taxes

Anyone who wishes the December holiday crush came at a time with warmer weather should put their shopping shoes on and head for their favorite store. The fourth annual Texas Sales Tax Holiday is on the calendar for August 2, 3 and 4, and this year it promises to be a busy weekend for Texas retailers who are rebounding following September 11 and a slow growth period.

The sales tax holiday provides exemptions from state and local sales taxes on most clothing and footwear that costs less than $100 before taxes. Taking out the sales tax saves shoppers about $8 on every $100 they spend.

Gina Smith, a mother of six in Bay City, says she takes advantage of the Sales Tax Holiday, particularly for items that stores rarely have sales on, like underwear and socks.

"I have three kids in school and three at home," Smith says. "Next year I'll have four in school. They wear uniforms, and it will definitely help to be able to buy them without the sales tax."

Millions in savings
Shoppers flocked to the stores during each of the first three Sales Tax Holidays, saving more than $108 million in the process, says Eric Stearns of the Comptroller's Revenue Estimating Division. During the holiday, Texans have saved about $85 million in state sales taxes and more than $22 million in local sales taxes.

"Retailers always look forward to the Sales Tax Holiday," says Chuck Courtney, president of the Texas Retailer's Association. "It's very important for them. Many independent retailers had a good Christmas, but sales dropped after that. Things have bounced back lately, and we're looking forward to a successful Sales Tax Holiday."

The rules for the 2002 holiday are the same as in previous years. Clothing and footwear used primarily for athletics or protective wear, such as golf cleats or football pads, are not tax exempt. However, tennis shoes, baseball caps, jogging suits and other athletic clothes commonly worn on the street are eligible for the tax exemption.

Added incentive
In 2000, Texas Comptroller Carole Keeton Rylander asked the Texas Legislature to expand the list of tax-exempt items to include backpacks, school supplies, sewing supplies and safety gear such as bicycle helmets and car safety seats. She also proposed expanding the tax holiday from three to five or six days to help ease the traffic jams the holiday can cause.

While the Legislature did not act on the proposal in 2000, Rylander says she will make a similar request to the 2002 Legislature, to help Texas families stretch their budgets a little farther as they shop for school and work clothes.

"I really wish school supplies were included," says Linda Koch, a mother of two in Austin. "Schools post longer and longer lists of things you have to buy, and it really does add up. Plus, now parents are required to buy a lot of things schools used to supply, like paper towels and Kleenex. So including school supplies would be a big help."

Other items, including accessories, jewelry, watches, handbags, wallets and briefcases are also not included in the Sales Tax Holiday. A complete list of tax-exempt and non-exempt items is available on the Comptroller's Window on State Government Web site.

An added bonus is that the holiday applies to layaway items. If something was put on layaway before the Sales Tax Holiday, the purchaser can redeem it tax-free during the holiday. Items placed on layaway during the holiday can be redeemed later, and are also tax-free.

"Back to School is always an important promotion for retailers, and the holiday puts more of an emphasis on that," Courtney says. "I can't explain it, but a 30- to 40-percent-off sale doesn't generate the kind of demand the Sales Tax Holiday does."

Greg Mt. Joy