Back-to-school tax break expelled

Schoolchildren grew taller, their feet got bigger and their backpacks fell apart since the last bell rang.

But here's a sober reminder to back-to-school shoppers waiting for the tax-free holiday to replace the old with the new. You won't get that relief this year. State legislators did not renew the popular tax break weekend, citing a $2 billion budget deficit.

Since 2002, the sales-tax free weekend aimed to help consumers -- and especially parents -- save on apparel, footwear, school supplies and computers. While it generated a frenetic buzz for shoppers and retailers alike, it cost the state $12 million in revenue. A similar break usually held in October for energy efficient appliances and other items resulted in a $500,000 loss of tax revenue.

The back-to-school tax-free weekend was proposed this year for July 29-Aug. 2, but the legislature has to approve the holiday each year.

This year, there was neither the will nor the money.

"What I hear Georgians say is they'd rather have their classroom teachers in the classroom teaching than have that sales (tax) holiday," Speaker David Ralston (R-Blue Ridge) said in March as budget negotiations in the House and Senate intensified.

Georgians pinched by job losses and the financial slump can ill-afford to have the break snatched away, argued Sen. Tim Golden (D-Valdosta). He helped create the sales tax holiday after noticing his wife's annual trips to Florida to take advantage of that state's version. Today, 16 states and Washington, D.C., including Florida and South Carolina, have variations of tax-free holidays.

While Florida resumed its tax holiday this year after ditching it in 2008 and 2009, Georgia is the only state this year to drop it.

"This year, of all years, people need it," said Golden, while acknowledging the state's financial dilemma. "Retailers need the boost more than ever and families need the boost more than ever."

John Heavener, president of the Georgia Retail Association, believes the state actually nets about $20 million during the sales tax breaks from salary, corporate and other tax revenue generated. He said the back-to-school shopping season is the second most important after Christmas for many retailers, especially for discount and department stores.

Heavener sent lawmakers a study showing these figures, which he called conservative, but his efforts didn't turn the tide.

"We were hoping as retailers that the common sense approach would work, and that looking at the facts and figures would convince them it was worth it in a year when everything was up in the air," said Heavener.

The Legislature appointed a committee to look at the state's entire tax structure this year, and Heavener believes the sales tax holidays could be indefinitely sidelined. Currently, state sales tax is 4 percent, but add-ons for county and local governments drive the average sales tax up to 6.5 percent, he said.

The National Retail Federation says retailers report a 30 percent increase in sales during tax-free shopping, even though the actual amount of the discount is small. Few people would bolt to stores for a 6.5 percent off sale, but the same amount disappearing in sales tax becomes an event.

"The psychological appeal goes far beyond the cash register," said J. Craig Shearman, vice president of government affairs for the NRF. "As tight as the economy is today, a few cents can mean a lot."

Karon Warren of Ellijay doesn't revamp the wardrobe for herself or her pre-schooler, but has always seen the sales tax holiday as a bonus for families.

"It's a little disappointing it's not happening this year," Warren said.

Retailers will still try to gin up back-to-school excitement. Aggressive sales and promotions are springing up with the hope that consumers will hardly notice the difference.

Bobby Johnson, vice president of sales at BrandsMart, said the traffic usually driven to those days will be more spread out because there will be "no sense of urgency."  Still, retailers don't expect consumers to turn away because the tax break has gone away.

"Shoppers will not lose out," said North Georgia Premium Outlets general manager, Heather Halpern. "They will have a great sale during a period they will be missing the no tax benefit . . . These savings will far exceed the tax free savings."

AJC staff writer Aaron Gould Sheinin contributed to this report.


2002: First year of Georgia's sales tax-free holiday

$12 million: Amount of tax revenue Georgia loses during the August tax-free weekend

$500,000: Amount of tax revenue Georgia loses in the fall energy efficient appliances tax-free weekend

30 percent: The increase in sales during tax-free weekends nationally, according to the National Retail Federation

$20 million: Amount the Georgia Retail Federation says the state nets from all forms of indirect tax revenue generation during tax-free weekend

6.5 percent: Average sales tax in Georgia, state and local components included