CT Sales Tax Free Week runs through Aug. 24
Connecticut kicked off the 19th installment of its sales tax holiday on Sunday, Aug. 18. As usual, Sales Tax Free Week is timed to coincide with back-to-school shopping.
Items rung up for less than $100 are spared the state’s 6.35 percent sales tax, with many retailers marking down items below that threshold to qualify them for the tax break. There is no cap on the number of qualifying items one can purchase on any single transaction.
In addition to clothing — new and “antique” alike, in the words of the Connecticut Department of Revenue Services — diaper purchases qualify under the sales tax holiday which runs through the close of business on Saturday, Aug. 24. Several categories of clothing and footwear do not qualify, to include hiking boots, field cleats, costumes and sports uniforms.
Gov. Ned Lamont’s office estimates that shoppers will save close to $5 million this year, even as the governor widened significantly the eligible services on which Connecticut can collect sales taxes. While Lamont defended the move as eliminating tax breaks for niche sectors, the state expects to reap more than $290 million annually as a result of the change, an amount equal to the entirety of the month of June.
Connecticut’s sales tax holiday is among only a few nationally to last longer than a weekend. The nonprofit Tax Foundation has routinely criticized sales tax holidays as little more than gimmicks that do not generate any meaningful increase in purchases or resulting economic growth, citing evidence that suggests consumers shift the timing of purchases.
“If a state must offer a ‘holiday’ from its tax system, it is an implicit recognition that the state’s tax system is uncompetitive,” stated Janelle Cammenga, a state tax policy analyst with the Tax Foundation, in a July study of sales tax holidays nationally. “If policymakers want to save money for consumers, they should cut the sales tax rate year-round.”
It is an open question, however, if a sales tax holiday might draw shoppers across borders of neighboring states to score deals. Massachusetts holds its own sales tax holiday this weekend after lawmakers voted to hold it annually starting this year, applying it to most purchases under $2,500 with vehicles, fuel, and restaurant tabs among the notable exceptions, as well as marijuana.
At the top end of that limit, an out-of-state resident could save more than $150 at checkout — though under Connecticut law residents and businesses must pay “use” taxes to the state Department of Revenue Services on purchases elsewhere for which sales taxes were not collected.
New York is included among the two-thirds of states nationally that do not offer sales tax holidays as tracked by the Federation of Tax Administrators. Most states hold them in the summer months but Florida, Texas and a few others offer windows in the spring for the tax-free purchase of electric generators and other emergency equipment in advance of hurricane season.
Lamont is pushing for Connecticut to add tolls to major highways, a move many retailers oppose on the theory it will deter New York residents from crossing the border to shop at Connecticut malls and retails strips.
For the entirety of the state fiscal year that ended this past June, Connecticut sales tax collections rose by 4.4 percent to $4.1 billion, providing the state with an extra $176 million in revenue for the year.
After the U.S. Supreme Court explicitly authorized states last year to charge sales taxes for online purchases, Connecticut served notice it would do so for any dotcoms generating at least $250,000 in Connecticut-based revenue across at least 200 transactions. Under an earlier agreement, Amazon has already applied Connecticut sales tax to transactions on its websites.
Includes prior reporting by Emilie Munson.
Alex.Soule@scni.com; 203-842-2545; @casoulman