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Tax Holidays Will Help Back-To-School Sales

Back-To-School sales are expected to generate an increase of +5.5%, a major slowdown compared to last year’s steep increase of +13.1% according to Consumer Growth Partners. This is anticipated despite the fact that a lot of states now offer a tax-free shopping period. (See Below).

Consumers appear to be cautious about spending and will only buy necessities. The higher prices on most consumer products, including high gasoline prices, caused by inflationary pressures and the war in Ukraine hurt the outlook. In addition, there is a fear of a recession that will hit us in the first two quarters early next year.

During the back-to-school sale period, apparel and accessories are projected to grow about +5.9% compared to +13.1% in last year. Apparel was weak last year because most students studied from home. Now, purchases of clothing and footwear are necessary, since children often outgrow what they wore in the last year or two. On the other hand, sales of personal care items are projected to be down to just a +3.5% increase compared to gains of +6.5% last year. Discounters and wholesale clubs will see a +2% increase, down from a +10% jump they enjoyed last year. Electronic and appliances are projected to be down 4%, an indication there will be less work (including schoolwork) from home.

The tax savings for back-to-school needs are managed and collected by the Federation of Tax Administrators. Some tax-free days were initiated as early as 1999 when Texas introduced them. Most recently, Connecticut added these savings days in 2022 when the state also saw the need to help home-bound students.

Tax holidays vary in length and in content by state. Some allow tax-free purchases for clothing and basic school supplies, while others extend the savings to computers, footwear, and backpacks. Some states like New York state (not listed here) charge tax only for apparel over $118 which is also a big help for parents shopping for apparel.

Listed here are the 18 states that participate, and the dates these states have chosen for their back-to-school tax holidays for 2022. Alabama (July 15-17), Arkansas (August 6-7), Connecticut (August 21-27 and is new this year), Florida (July 25 – August 7), Illinois (August 5-14), Iowa (August 5-6), Maryland (August 14-20), Massachusetts (August 13-14), Mississippi (July 29-30), Missouri (August 5-7), New Mexico (August 5-7), Ohio (August 5-7), Oklahoma (August 5-7), South Carolina (August 5-7), Tennessee (July 29-31), Texas (August 5-7), Virginia (August 5-7), and West Virginia (August 5-6 was added in 2021).

Certainly, these tax-free days should encourage families to do their back-to-school shopping at that time and save the tax money. Many children will be going back to in-person learning at school fulltime, since reports indicate that virtual schooling was not effective for many students.

Parents will have to absorb additional pricing increases this fall when they face higher food prices for school meals or shop for the lunch boxes they prepare. In addition, transportation costs will likely be higher due to the steep rise in gasoline prices.

POSTSCRIPT: The Back-to-School shopping season is generally viewed to run from July 4th until Labor Day. Most primary schools start no later than the day after Labor Day. Many kids will have enjoyed relaxed summer lifestyles, and some will have just come back from camp. All will now have to obey strict rules and regulations of structured school days. Even before the summer break, many had been out of schools because of the pandemic so this will be an adjustment. While they may have enjoyed learning from home, it will help them to be back in a disciplined environment.