Tax-free shopping ‘big deal’ for some, less so for others

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The general manager of the Office Depot at the DeVargas Center in Santa Fe knows that New Mexico’s annual tax holiday weekend is a big deal for many families.

For weeks in advance, Carlos Tapia has seen parents coming in to price items and asking what the savings will be if they wait until this coming weekend, when they won’t have to pay the 8.31 percent gross receipts tax – $8.31 on a $100 purchase, but just more than $83 on a $1,000 laptop computer.

“I think it’s a big deal,” Tapia said. “Laptops, printers, computers – a lot of people wait until this weekend. It can be a big savings.”

This weekend, when shoppers buy specified items at participating stores, they won’t have to pay the statewide gross receipts tax of 5.12 percent or the local tax rate, which can vary, but increases the total tax to a high of 9.2 percent in parts of Taos County. “It’s a big deal for Taos,” said Sen. Carlos Cisneros, a Democrat who chairs the Legislature’s Tax Stabilization Committee. “It’s a win for the retailers and a win for the families. It promotes business and helps consumers – and it keeps folks from going to Colorado to shop.”

New Mexico is one of 16 states that still has a sales tax holiday, down from 19 in 2010. Critics say it’s a political gimmick that distracts from real tax reform, favors certain products and ends up giving unnecessary breaks to wealthier consumers. But the concept remains popular with shoppers and participating retailers, particularly big chains that mount promotions intended to stimulate buying.

The tax-free sales are billed as a way to help families prepare for the coming school year, though some of the exempt items – diapers, blankets and checkbook covers – don’t appear directly related to education.

The tax breaks start at 12:01 a.m. Friday, Aug. 4, and they conclude at midnight Sunday, Aug. 6. The hours are important because, even if stores are closed, Apple and other internet retailers are now urging consumers in tax-holiday states to take advantage of the shopping weekend on their websites.

There is no estimate of how much local governments lose from the weekend, but the cost to the state, which would normally get an inflow from the purchases, has been about $3.3 million annually, according to data from the state Taxation and Revenue Department. This is one example of the hundreds of tax breaks and loopholes that remain on the books while lawmakers in New Mexico have been cutting spending to education and other services as a way to balance its $6 billion operating budget.

In New Mexico, there is a dollar limit to many products that qualify for the shopping weekend: Clothes and shoes must be priced less than $100 a unit; a laptop, notebook or desktop computer has to be $1,000 or less; and related hardware must be $500 or under.

But the 11-page listing qualifying tax-free items, as determined by the New Mexico Taxation and Revenue Department, contains many only marginally related to school or education, such as fishing vests, ski boots and bowling shoes.

Ben Cloutier, a spokesman for the department, said the tax-free element of the weekend has pushed retailers to offer more discounts and sales to get people into stores.

“Sales are already ramping up, so we’re looking at whole week of sales going into the weekend,” Cloutier said. “Many shoppers have told us they want to get that computer and are waiting to shop. It’s still extremely popular.”

J.C. Penney in New Mexico, for instance, has announced extended hours for the weekend, along with discounted eyeglasses and $10 haircuts at its salons. The retailer also is promoting clothing and jeans with buy-one, get-a-second-for-a-p­enny specials.

Office Depot and OfficeMax stores in the state are promoting an array of specials, from composition books for 1 cent with a minimum $5 purchase to free technical support with a computer purchase.

The fact that ski equipment is included in the tax-free weekend doesn’t bother Cisneros.

“Some schools up north offer opportunities for ski classes,” said Cisneros, whose district includes Taos Ski Valley. “They can buy their equipment, boots and gloves at a lesser cost. Everybody benefits.”

Contact Krasnow at brucek@sfnewmexican.­com. This story was first published in the Santa Fe New Mexican, a sister publication of The Taos News. 

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