Sales tax holiday catches on

by Center for Personal Finance editors

WASHINGTON (7/26/06)--Back-to-school shopping gets a tax break again this year in at least a dozen states and the District of Columbia, as more states sign up for the sales tax holiday (Federation of Tax Administrators June 2006).

The intent is to provide relief to taxpayers by offering a temporary sales tax exemption on certain items for a specified time; events last anywhere from one day to more than a week, depending on the state.

Some critics question whether a sales-tax break really benefits shoppers, who may get caught up in the buying frenzy. If you live in a state with the holiday, or plan to cross state lines to take advantage of the exemptions, plan ahead so you don't end up breaking your budget:

Don't spend more than you'd planned, just to save a few dollars on the sales tax.

Go through the child's closets and identify specific clothing needs. What fits, what doesn't? Make a list and stick to it.

Don't pay for the purchases with credit cards if you're carrying a balance. If you can't pay off those purchases in full when the bill comes due, you'll end up paying interest and may wipe out the sales tax savings.

For a list of participating states, dates, and items considered tax-free, visit the Federation of Tax Administrators website.