Don't Mess With Taxes

Many die-hard Tennessee shoppers are already at their local malls this morning, as the Volunteer State's special spring sales tax holiday began today.

The sales-tax price cuts on selected items began at 12:01 a.m. today, April 25, and ends Sunday, April 27, at 11:59 p.m. During this time, Tennesseans won't have to pay the an extra 9.25% levy, which is the combination of the 7% state and 2.25% local sales taxes, on certain items.

This one-time no-tax weekend is a companion to the state's regular shopping (or should we way, spending) event that is held the first weekend of each August.

As with that regular sales-tax-free fall weekend, during this spring weekend retailers will not be collecting state and local sales taxes on purchases of school supplies, art supplies and clothing priced $100 or less per item and computers priced $1,500 or less.

You can get more details on exactly what is and isn't tax free at the Tennessee Department of Revenue special Web page.

In addition to purchases made at Tennessee stores, state tax officials say that this weekend's sales tax holiday also applies to qualified items sold via mail, telephone, e-mail or the Internet. You simply have to place the order and pay for the items, and the seller has to accept your order for immediate shipment, during the holiday. It doesn't matter when the item is actually delivered to your Tennessee home.

Popular, but poor, tax policy: "Each of the 2007 sales tax holidays provided almost $10 million in tax savings to Tennessee families," said Revenue Commissioner Reagan Farr in announcing this April tax holiday. "I hope that everyone will take advantage of this year’s special three day weekend of tax savings."

Economists, however, say that sales tax holidays are not good tax policy.

"The purpose of sound tax policy is to raise necessary revenue for programs while minimizing distortions in the economy, and interfering as little as possible with the choices of free individuals in the marketplace," write Tax Foundation experts Jonathan Williams, Curtis S. Dubay and Johanna Mausolf. "Unfortunately, sales tax holidays fail this test of sound policy."

Businesses, too, pay a price. While retailers might get a few more sales from shoppers making special trips, they also have more administrative costs. Most, however, simply grin and bear it and hope that their bookkeeping frustrations will be offset by additional sales.

That's bound to happen, since shoppers love the getting a perceived deal, especially at the expense of the tax collector. And politicians love anything that makes potential voters happy.

So expect to see tax holidays, both special events like the one this weekend in Tennessee, as well as the dozen or so scheduled every fall, to stick around for a while.

And as those back-to-school sales tax holiday dates get closer, we'll post the dates here at Don't Mess With Taxes.