More than a dozen states are offering a limited period of tax-free shopping for back-to-school purchases this summer — and some are already underway.
Some 16 states eliminate sales tax on purchases for back-to-school shopping (including clothes, footwear and supplies) between July and August. Alaska, Montana, New Hampshire and Delaware never charge sales tax. Minnesota, New Jersey, Pennsylvania, Rhode Island, New York and Vermont don't charge tax for clothing and footwear, according to discount shopping site Brad's Deals.
"The kids don't want to think about school, but it's a good time to do it," said Michelle Madhok, shopping expert and founder of deal site SheFinds.com.
There are some restrictions, however. Many states have price limits on how much each item can cost, and not all counties within each state participate. Connecticut allows the tax exclusion for clothing and footwear that cost less than $300 per item, while Iowa excludes sales tax on these items if they cost under $100.
These states have not set limits to how many items can be purchased. "It's not like you're spending $100 per item on a child, so if you're spending $500 on clothing and everything is less than $100, it can save you a lot," said Trae Bodge, a brand strategist at TrueTrae.com. Sales tax is usually 6% to 9%, depending on the state, she added.
Parents estimate they'll spend more than $300 per child on clothing, footwear, supplies and electronics, according to a recent survey by Citi Retail Services, and that figure increases almost $100 when parents and children shop together.
Amazon, Walmart and Target have already begun their back-to-school deals, most likely as a result of Amazon's Prime Day in mid-July. Research suggests that 40% of Prime Day shopping goes toward school supplies.
Eliminating sales tax could also help low-income parents, who are more likely to apply for credit cards to pay for school supplies. Those who earn less than $25,000 per year are 10 times more likely than their higher-earning counterparts to apply for credit cards in an attempt to save as little as 5% on supplies, a survey from personal-finance site WalletHub found.
That can be a risky financial move. While the average credit card interest rate is 17%, many credit cards marketed to low-income consumers, or to people with bad credit scores, can charge interest rates as high as 30% or more.
Parents can make the most of their purchases by pairing tax-free shopping holidays with discounted gift cards or online browser extensions like PriceBlink and Wikibuy to scour the web for deals, Bodge said. They can also set up deal alerts for more expensive back-to-school items on coupon sites.