As summer winds down, New Mexico tax holiday arrives

By Teya Vitu
For the Santa Fe New Mexican
tvitu@sfnewmexican.com
Posted 8/2/19

It’s often hailed as a big perk for parents burdened with long lists of school supplies, clothing and shoes to buy before the start of a new school year — necessities that can cost up to hundreds of dollars per child.

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As summer winds down, New Mexico tax holiday arrives

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It’s often hailed as a big perk for parents burdened with long lists of school supplies, clothing and shoes to buy before the start of a new school year — necessities that can cost up to hundreds of dollars per child.

But some critics see New Mexico’s three-day gross receipts tax holiday as a sort of extended Black Friday in August — one that costs the state millions of dollars in lost revenues.

Now in its 15th year, the tax holiday, one of 16 nationwide, does soften the blow of back-to-school shopping. State and local sales taxes, now at 8.4375 percent in Santa Fe, add up quickly for families. With the average U.S. family spending about $697 for students in kindergarten through 12th grade, according the National Retail Federation, a local family could save about $60 on tax exemptions during this weekend’s shopping event, which runs Friday through Sunday at participating stores.

 

“The timing is such we certainly hope it helps parents make the cost of sending students back to school more manageable,” said Charlie Moore, a spokesman for the New Mexico Taxation and Revenue Department. The state expects to lose $4 million in gross receipts tax revenue over the three-day period, he added.

Parents aren’t the only shoppers who will avoid paying taxes.

Store clerks don’t ask customers to distinguish which purchases are for school-age kids, and the list of qualifying tax-free items includes many that are distinctly for adults — bridal apparel, clerical vestments, corsets, garter belts, and fur coats and stoles, for instance.

Not everything is tax-free. Broadly speaking, clothing and shoes qualify, as do computers, computer accessories and school supplies. There are price caps on qualifying items: An article of clothing or pair of shoes must cost less than $100 to avoid the tax; tax-free school supplies — ranging from crayons, pencils and highlighters to printer paper to backpacks — must be under $30; computers have to be priced under $1,000; and related computer equipment is capped at $500.

“This is a great opportunity to get some shopping done while making your hard-earned dollars stretch a little further, especially if you’re getting kids ready to go back to school,” state Taxation and Revenue Secretary Stephanie Schardin Clarke said in a news release on this weekend’s tax holiday.

But Verenda Smith, deputy director of the Federation of Tax Administrators, said such tax holidays are not good tax policy.

“It’s all politically driven,” Smith said. “It’s very much driven by retail. They are more successful in some states than in others.”

States with tax holidays are a mix of the richest and poorest states, and they include some of the biggest as well as some of the smallest.

“There is no particular rhyme or reason why some states [have tax holidays] and why not others,” Smith said.

New Mexico, which started its back-to-school tax holiday in 2005, was the seventh state to do so. Now there are 16, including neighboring Texas and Oklahoma. In addition to back-to-school tax holidays, some Southern states have a second tax-free shopping event geared toward disaster preparedness, and a few states have an event waiving taxes on energy-efficient home appliances.

New Mexico is one of six states that allow tax-free computer purchases, according to the Federation of Tax Administrators.

J. Craig Shearman, vice president of government relations and public affairs for the National Retail Federation, defended tax holidays.

“The real point is to help families,” he said. “There are very many people to whom it makes a very large difference. There are people on the borderline of not being able to buy new clothes for a kid.”

What’s tax-free?

The New Mexico Taxation and Revenue Department has posted a general list of items that do and do not qualify as tax-free purchases at participating stores during the state’s 15th annual gross receipts tax holiday, which runs this weekend, Friday through Sunday.

Anything athletic is out — aside from sweatsuits, sneakers, bowling shirts and, inexplicably, ski masks. Following are some other highlights of the list:

Nontaxable

• Clothing: Most types, including coats and jackets, that aren’t intended for any athletic purpose (athletic socks are OK). Tax-exempt garments also include formalwear, such as prom dresses, bridal gowns and tuxedos; fur coats; dress gloves; corsets and other types of lingerie; clerical vestments; workers uniforms; and lab coats.

• Hats: Even those for sports make the cut.

 

• Footwear: Boots and shoes (tennis shoes are fine, but nothing with cleats or otherwise designed for a sport).

• Computers: Those up to $1,000, along with equipment up to $500.

• School, office and art supplies.

Taxable

• Anything athletic: This includes most types of clothing and gear, shoes, gloves and helmets — no leg warmers or swimwear, and no gym bags or duffel bags.

• Luxury items: No handbags, watches or jewelry.

• Music: Both instruments and recorded CDs are taxable.

• Cellphones.

• Eyewear.

• Luggage.

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