Sales tax holidays kick off, meaning it's back-to-school season

  • State sales tax holidays are coming up, with Alabama's starting today.
  • Sixteen states are participating this year.
  • Consumers can usually save on school supplies, computer supplies or clothing.

With July flying by, hordes of parents are expected to start flooding stores' school supply aisles before you know it.

Some parents are rushing to their nearest retailers even before August starts, and one state is starting its tax-free holiday as soon as today.

Sixteen states will be participating this year. Many offer a tax break on school supplies, clothes and computers up to a certain price.

Total spending for back-to-college shopping is expected to reach $54.1 billion. Spending on and by students in elementary through high school, meanwhile, will hit a projected $29.5 billion this year, according to a National Retail Federation survey.

Buyers should prepare and read the fine print before compiling their shopping lists, said Carol Kokinis-Graves, a senior state tax analyst at Wolters Kluwer Tax & Accounting.

"One thing that's common is that there's always some sort of price ceiling," Kokinis-Graves said. "You can only buy products for less than a certain amount, and sometimes items sold in a bundle will go over the ceiling."

"Retailers have found tax holidays to be tremendously successful in order to get people into the stores and frame of mind to shop." -J. Craig Shearman, vice president, National Retail Federation

Not everything is on sale either, Kokinis-Graves added.

"Many parents go out to buy clothing and shoes for school, but a lot of times, tax holidays don't apply to athletic gear," she said. "Consumers need to check because there might be certain clothing excluded or items that don't qualify."

While many shoppers will save no more than 5 percent to 10 percent on their purchases, tax-free holidays continue to be popular for both retailers and consumers, said J. Craig Shearman, vice president for government affairs and public relations at the National Retail Federation.

"Retailers have found tax holidays to be tremendously successful in order to get people into the stores and frame of mind to shop," Shearman said. "Americans hate paying taxes, so any time they can get away with not paying them is extremely popular among consumers."

Tax-free weekends are welcome news to local brick-and-mortar retailers. The S&P Retail ETF is down almost 9 percent year to date as online retailers such as Amazon grab more market share.

Tax breaks also provide shoppers the opportunity to purchase products that may not usually come with a promotional deal.

"Sales tax holidays work because some sorts of products never go on sale like Apple," said Kit Yarrow, a consumer psychologist at Golden Gate University. "Purchasing those products is a saving consumers usually won't get."

Companies will sometimes take advantage of the influx of shoppers during tax-free periods by adding on promotional deals, Yarrow added.

Those extra savings could mean a lot for low-income families, according to Shearman.

"There's some families in fortunate situations where saving 5 to 10 percent is welcome but doesn't break them," he said. "But there's millions where saving 5 to 10 percent does make a difference."

Refer to the chart below to find out if your state is participating in a sales tax holiday this year.