The state will lose about $2 million on the coming sales tax holiday for back-to-school purchases but that money give consumers a bit more to spend on clothes and other items ahead of the start of classes.
Retailers are preparing for a busy first weekend in August, when apparel, school supplies and certain other items will be exempt from state and local sales taxes. The sales tax holiday starts at 12:01 a.m., Aug. 3, and ends at 11:59 p.m. on Aug. 4.
The National Federation of Independent Businesses said the sales tax break gives small businesses a needed boost.
Items covered under the exemption include a wide range of clothing items, from aprons and athletic supporters to wedding dresses. But the catch is that each item has to cost less than $100. And the rules stipulate that items can’t be divided to fall under the limit. So consumers can’t buy one shoe at a time or separate the components of a suit of clothes that are otherwise sold as a set.
Clothing accessories or equipment are exempt if they cost less than $50. The category includes cosmetics, "hair notions,” nonprescription sunglasses, umbrellas, watches, wallets, wigs and other items.
School supplies are also exempt, including binders, book bags and lunch boxes.
Some art supplies and school instruction manuals are also tax-free.
The Department of Finance and Administration said the exact amount the holiday will keep from entering state coffers isn’t known. But when the Legislature approved the law in 2011, the agency estimated that it would cost about $2 million per year for a two-day sales tax break, John H. Theis, assistant commissioner of revenue, said in an email.
"That estimate was based on information from other states with a sales tax holiday where merchants are required to separately report those sales to the state. Current Arkansas law does not require merchants to separately report their sales activity for the sales tax holiday weekend,” he said.
Theis said there were no major problems during past sales tax holidays. He said DF&A looked at problems other states had when they launched similar programs and were able to head off any significant difficulties.
The Arkansas director of the NFIB, Sylvester Smith, said the economy is still slow and the weekend will help sales at smaller businesses.
"The sales-tax holiday puts people in the mood to shop, and we’re hoping they buy at least some of their school clothes and supplies at small, locally-owned businesses, because when you support small business, you’re supporting your community,” Smith said in a statement.