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The TaxWatch Research Blog is a forum where our research staff can address topics and issues in a short format. Keep an eye on this space during Legislative Session for frequent posts making sense of the activity at the Capitol. 

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The 2021 B-T-S Sales Tax Holiday is here

Folks, the school year is right upon us. We are all about to get back into bus stop routines, bus stop traffic, haircuts, new shoes, and the ubiquitous school supplies. Luckily, thanks to a now-routine annual ritual, next week starts 10 days of many of those things being exempt from sales taxes. 

The 2021 Florida Legislature enacted three sales tax holidays, the upcoming 10-day “back-to-school” holiday, a 10-day disaster preparedness tax holiday (took place in June), and a 7-day “Freedom Week” holiday (took place at the start of July).  The Legislature wanted to make sure that this year, coming out of the (likely) worst of the pandemic, Floridians would have a little help in getting things back to normal.

This year, from July 31 – August 9, many back-to-school items will be exempt from sales tax, including clothing (such as footwear, wallets, and bags) that cost $60 or less; school supplies costing $15 or less; and the first $1,000 of the sales price of computers and related accessories for personal use. Overall, this will save shoppers an estimated $70+ million, but that’s not the only benefit.

We all know the importance of education. During the Florida TaxWatch Principal Leadership Awards program each year, we are fortunate enough to get a chance to get to know each year’s winners, and to learn about their schools. One of the universal truths we have picked up from these transformative leaders is that when students are prepared for school, they are much more likely to be ready to learn, and to excel in the classroom. Making sure that students have the right supplies is one early step in that preparation.

These holidays are a fantastic way to kick off the school year, our research has consistently supported them, and they have become a popular method for reducing the burden on taxpayers. Bipartisan support in the Florida Legislature has grown for these holidays over time, and they have come to be expected by the public. Since starting, these holidays have only been skipped during times of recession and budget deficit, with the last skip occurring in 2009. 

In addition to giving back to taxpayers, holidays also have the potential for positive impacts on employment, income, and tax revenues. When consumers buy clothing, direct effects impact the retail and apparel industries, both of which are currently trying to claw their way back from the pandemic’s shutdown.

The impact of increasing discretionary spending in the Sunshine State is large, as the retail industry is extraordinarily important to Florida’s economy. Florida’s 306,100 retailers employ 2.2 million people, providing roughly one out of every five jobs in the state, pay $69.7 billion in annual wages, and contribute $104.2 billion in gross domestic product. A study of the August 2010 Florida Back to School Sales Tax Holiday by the Washington Economics Group (WEG) found that the holiday resulted in increased sales in Florida. The study compared sales from 2009, when there was no holiday, to 2010, when the holiday was reinstated and found that gross sales increased by 3.8 percent from August 2009 to August 2010 and that $293 million of that increase was attributable to the sales tax holiday.  Furthermore, due to the intense competition in the retail sector, many stores advertise special discounts during the holiday, increasing the benefit to consumers.

Florida’s sales tax holidays have become more than just a tax break. They are a traditional back-to-school event that neighbors talk about and businesses promote. There is likely no other tax break that generates such excitement among taxpayers while stimulating business activity with increased advertising and competition. Next week, get out there and take advantage of this year’s extended sales tax holiday before school starts!

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