Texas sales tax holiday turns 25

School bells are starting to signal the end of summer across the United States. For students, parents, and teachers, the return to the classroom may stir excitement or dread. Retailers may have a similar response to back-to-school sales tax holidays.

Tax-free events are often an annual tradition, like the return to school. In fact, the Texas sales tax holiday is turning 25 this year.

Students change with each passing year; it's always fun to see who got a new haircut or grew a few inches over the summer. Sales tax holidays often stay more or less the same, but they can change over time and some have. New Jersey offered a sales tax holiday in 2021 and 2022 but repealed it in 2024. The Ohio sales tax holiday was broadened and lengthened for 2024, and Florida sales tax holidays are rarely the same twice.

A brief history of Texas sales tax holidays

The first Texas sales tax holiday took place in 1999 during the first Friday, Saturday, and Sunday in August. It applied to clothing and footwear priced less than $100.

Lawmakers originally sought to establish a more generous, month-long sales tax holiday: Had 1999 Senate Bill 441 been enacted as first introduced, the sales tax holiday would have lasted the entire month of August, and the exemption would have applied to "clothing or footwear designed to be worn on or about the body of a person younger than 13 years of age … if the sales price of the article is less than $500." The $500 threshold was dropped to $200 before lawmakers settled on $100.

According to the Texas Comptroller, the 1999 sales tax holiday saved Texas taxpayers roughly $32.6 million in state and local sales tax. That's a more positive way of saying that it deprived the state of roughly $32.6 million in state and local sales tax revenue.

The $100 price threshold hasn't changed since 1999. Thanks to inflation, the sales tax exemption now applies to fewer items. One amortization calculator estimates that $1 in 1999 is worth $1.87 today.

However, Texas has broadened the back-to-school sales tax holiday a bit. School backpacks ($100 or less) were added to the list of eligible products in 2007; school supplies ($100 or less) were added in 2009. It became clear in 2021 that cloth and disposable fabric face masks qualify for the annual clothing and footwear sales tax holiday.

Texas established its tax-free weekend for Energy Star products in 2007; the first such event was held in 2008. The energy efficient products sales tax holiday was expanded to include water-conserving products in 2015, the same year the Legislature created a sales tax holiday for emergency preparation supplies.

"These holidays demonstrate Texas officials' commitment to helping taxpayers retain their hard-earned money whenever possible," Comptroller Glenn Hegar wrote in the August 2024 edition of Fiscal Notes. He said his family looks forward to every sales tax holiday.

Many consumers do. After all, who doesn't like to save money? And necessary though sales tax may be as a source of funding, does anyone actually like to pay it?

Retailers may have a more complicated relationship with sales tax holidays. While these events may increase sales of eligible items, they can be a serious headache for the folks responsible for sales tax. Small businesses in particular may struggle to comply with sales tax holiday requirements. As the Tax Foundation notes, the compliance costs associated with sales tax holidays can be "damaging to small businesses."

Other back-to-school sales tax holidays

Texas isn't the only state with a back-to-school sales tax holiday. A few states hold back-to-school tax-free weekends in July, but the lion's share of these tax-free events take place in August. Some last just two days, others last a week or longer.

The start of the month saw back-to-school sales tax weekends in eight states:

• Iowa (August 2-3)
• Missouri, New Mexico, Oklahoma, South Carolina, and Virginia (August 2-4)
• West Virginia (August 2-5)
• Arkansas (August 3-4)

Back-to-school sales tax savings can still be had in Connecticut, Florida, Maryland, Massachusetts, Ohio - and Texas, of course. In fact, Florida and Ohio are knee-deep into their summer 2024 tax-free events.

Here are more details, listed in order of the events.

Florida back-to-school sales tax holiday

The following products qualify for the Florida back-to-school sales tax holiday, which runs July 29-August 11:

• Personal computers and computer-related accessories priced $1,500 or less
• Clothing, wallets, and qualifying bags priced $100 or less
• School supplies priced $50 or less
• Learning aids and jigsaw puzzles priced $30 or less

Ohio sales tax holiday

Ohio's annual sales tax holiday was expanded for 2024, as noted above. It runs July 30 through August 8 instead of merely during the first weekend of August. It also applies to most tangible personal property priced less than $500.

In past years, the Ohio sales tax holiday applied to clothing priced $75 or less, and school supplies and instruction materials priced $20 or less.

Texas back-to-school sales tax holiday

The annual Texas sales tax holiday runs August 9-11, 2024. As explained above, the following items qualify for the temporary sales tax exemption:

• Clothing and footwear priced less than $100 (including cloth and disposable fabric face masks)

• Specified school supplies and school backpacks priced less than $100 per item

Massachusetts sales tax holiday

The exact dates of the Massachusetts annual sales tax holiday are a mystery until the Legislature announces them, which it must do no later than July 1 each year. The 2024 sales tax holiday will take place August 10-11.

Most single items of tangible property priced $2,500 or less qualify for the temporary sales tax exemption in The Bay State.

Maryland back-to-school sales tax holiday

The annual sales tax holiday in Maryland is a full tax-free week, August 11 and 17, 2024. Clothing and footwear priced $100 or less are exempt from sales tax during this time.

Most school supplies remain subject to sales tax during the tax-free week. However, the temporary exemption applies to the first $40 of qualifying backpacks and bookbags.

Connecticut back-to-school sales tax holiday

Qualifying clothing and footwear priced less than $100 is exempt during the Connecticut annual sales tax free week, August 18-24, 2024.

Read our 2024 sales tax holidays blog for more information about these and other tax-free events. And if you're a retailer who dreads these events the way some kids dread school, it might be time to consider automating sales tax compliance.