Reality Check: Kentuckians lured by sales tax holidays

LEXINGTON, Ky. (WKYT) - While tax experts call it nothing more than a political gimmick, the lure of tax free shopping is prompting businesses in neighboring states to promote sales and added hours.

Seventeen states, primarily in the southeastern U.S., will hold a sales tax holiday this year which is down from a peak of 19 states in 2010, according to the Tax Foundation, an independent, non-partisan organization that researches federal and state tax policy.

Since 2006, shoppers in neighboring Tennessee and Virginia have had tax free holidays during the first weekend in August to promote back to school shopping. While border state Missouri also offers the tax-free shopping incentive, counties and cities can opt out to avoid losing their share of sales tax revenue.

"While it has been proposed in Kentucky several times in the end it has usually died in the legislature because of concerns of lost tax revenue," said WKYT political editor Bill Bryant.

"Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases," according to the Tax Foundation. "Some retailers raise prices during the holiday, reducing consumer savings."

Despite estimates that it saved North Carolina residents $14.7 million last year, this year will likely be North Carolina's last sales tax holiday. As part of the state's general assembly tax reform effort, the North Carolina senate earlier this month passed a plan to eliminate the tax holiday starting next year.

Missouri
Dates: August 2-4
Rules: Tax-free items includes any article of clothing having a taxable value of $100 or less; school supplies not to exceeding $50 per purchase; computer software with a taxable value of $350 or less; and personal computers not exceeding $3,500.

Tennessee
Dates: August 2-4
Rules: Tax-free items include clothing with a price of $100 or less per item, school and school art supplies with a price of $100 or less per item and computers with a price of $1,500 or less. These items are exempt from state and local sales tax in Tennessee during the holiday.

Virginia
Dates: August 2-4
Rules: During this three-day period, purchases of qualifying school supplies selling for $20 or less per item, and purchases of qualifying clothing and footwear selling for $100 or less per item will be exempt from sales tax. Retailers may also choose to absorb the tax on other items during the holiday period, but they are responsible for paying the tax on those items to the Virginia Department of Taxation.


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