From the Archives: Virginia’s school supplies ‘tax-free holiday’ more complicated than necessary

Virginia’s school supplies ‘tax-free holiday’ more complicated than necessary
August 4, 2011 11:34 PM MST

From 12:01 a.m. on Friday, August 5, through midnight on Sunday, August 7, shoppers in Virginia will be able to enjoy a sales tax holiday on a limited number of items. The tax holiday’s goal is to ease some of the burden on families with children who are purchasing school supplies in anticipation of the coming academic year.

The first tax-free school shopping holiday took place in August 2006 and has been repeated each year since then.

Shoppers save $4.3 million

Governor Bob McDonnell explained in a statement released by his office:

“Returning to class is an exciting time for students, but it can also be a stressful time for their parents. Saving 5 percent on their purchases is not a great deal, but every bit helps in this struggling economy. I urge all Virginians to go out and save money, while supporting our retail community.”

The governor’s office estimated that this year’s tax-free holiday will save Virginia shoppers $4.3 million in sales taxes that they would otherwise pay.

Delegate Rob Bell (R-58) of Albemarle County pointed out in an email to constituents that during the tax-holiday weekend, “a variety of school supplies will be tax-free as long as each item costs $20 or less. Most clothing items and footwear will also be exempt from the 5 percent sales tax as long as they are priced at $100 or less each. There is no limit on the number of items you can purchase tax-free as long as each item qualifies.”

Whatever its merits, the sales-tax holiday’s framework is far more complicated than it needs to be. The Virginia Department of Taxation provides a lengthy list of those items that are eligible and others that are ineligible for the sales tax exemption through the weekend. It would have been much simpler for the General Assembly to decree that all consumer items priced at $100 or less would be tax-exempt for the 72-hour period of the tax holiday.

Mix of inconsistencies

Instead, the list offers a higgledy-piggledy mix of inconsistencies, in which “athletic supporters” are eligible items, but “cleated or spiked athletic shoes” are not. Computers and computer peripherals (like printers) are ineligible, but “all calculators, including those with printing capabilities” are eligible for the exemption.

Some eligible items have little or no relation to school supplies: choir and altar clothing; diapers, children and adult, including disposable diapers; and wedding apparel, including veils, to name a few.

“Book bags” are tax exempt but “briefcases” and “handbags” are not. Clothing items that dancers wear -- leotards and tights -- are eligible but ballet and tap shoes are not.

The lengthy and inconsistent list should be evidence that neither the General Assembly nor the Department of Taxation has thought through all of the ramifications of the tax-free holiday.

Business logic

Retail businesses, however, have thought things through to their logical conclusion.

In years past, some stores have simply absorbed the sales taxes on items left off the official list, declaring that virtually everything on their shelves would be tax-free for the weekend.

If the government behaved as rationally as businesses, that policy would be true across the board, in 2011 and in the future.

Publisher's note: This article was originally published on Examiner.com on August 29, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Victoria's Secret Elementary School

Year after year, as Virginia's annual "tax free" back-to-school shopping weekend rolls around, I find a reason to take aim at the program and set phasers to mock.

In 2011, for example, I pointed out on Examiner.com how the tax-free holiday is "more complicated than necessary":

Whatever its merits, the sales-tax holiday’s framework is far more complicated than it needs to be. The Virginia Department of Taxation provides a lengthy list of those items that are eligible and others that are ineligible for the sales tax exemption through the weekend. It would have been much simpler for the General Assembly to decree that all consumer items priced at $100 or less would be tax-exempt for the 72-hour period of the tax holiday.

Instead, the list offers a higgledy-piggledy mix of inconsistencies, in which “athletic supporters” are eligible items, but “cleated or spiked athletic shoes” are not. Computers and computer peripherals (like printers) are ineligible, but “all calculators, including those with printing capabilities” are eligible for the exemption.

Some eligible items have little or no relation to school supplies: choir and altar clothing; diapers, children and adult, including disposable diapers; and wedding apparel, including veils, to name a few.

That led to an interview with the Newsplex in Charlottesville in which I noted:

"We have these weird combinations where an athletic supporter is tax exempted but athletic shoes with cleats are not."

My solution?

"Simplify it, simplify it, simplify it."

Sincere suggests tax breaks for anything $100 or less across the board, not just school.

"Easy to understand, much easier for our retailers who have to program their computers."

As far back as 2006, on the occasion of the first such sales-tax holiday in Virginia, I made the same recommendation:

The easiest, most logical, most consumer- and business-friendly thing to do for the tax holiday would simply have been to decree that on this particular three-day weekend, all items with a retail price of $100 or less would be tax-exempt. That would be simple to program into stores' computers, and it would be simple for the average customer -- that is, taxpayer -- to understand.

Then in 2008, I asked:

How about this idea? A tax-free year. Is that too much to hope for?

These reminiscences are prompted by a report by Watchdog.org's Virginia bureau, which points out another ridiculous anomaly in the list of acceptably tax-free items:

Planning on buying your daughter some sexy lingerie for her first day back to school this fall?

Well, now you can — free from Virginia state sales tax, thanks to this weekend’s back-to-school clothing and supplies tax holiday.

But, if you’re planning on purchasing some new shin guards for your same soccer superstar daughter who plays on her school’s team, forget it.

That isn’t exempt from the state sales tax during the Friday-through Sunday tax holiday, because state officials decided that doesn’t fall under the category of “clothing.”

Watchdog.org also points to a compelling "top ten list" of reasons that explain why sales-tax holidays are a flawed idea, if not actually counterproductive, courtesy of the Tax Foundation. It's a PDF but well worth the read.

This year's back-to-school sales-tax holiday begins Friday, August 2, and extends through Barack Obama's birthday on Sunday, August 4.

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