Sales tax holiday for school purchases starts Friday
By RON SELAK JR.
A scene in the 1986 comedy “Back to School” shows Rodney Dangerfield’s character Thornton Melon pull out at least a half-dozen credit cards in the fictional Grand Lakes University bookstore to pay for supplies for his son and his son’s roommate.
He then makes a grandiose gesture, “Hey folks, it’s on me. Shakespeare for everyone,” Melon says, offering to cover the tabs of everyone in the store.
Amusing … sure. Relatable nowadays … not so much really, given today’s inflationary economic climate that’s expected to cause, at least in part, consumers to match last year’s back-to-school record spending and overtake 2021 back-to-college spending, according to data from the National Retail Federation.
But there’s a bit of a relief in store for shoppers in Ohio: The state’s annual sales tax holiday is upcoming, meaning that consumers can save between 6.5 percent and 8 percent on sales tax on certain items.
“We see it as a win, win, win for the consumer, the retailer and the state,” said Lora L. Miller, director of governmental affairs and public relations for the Ohio Council of Retail Merchants. “The consumer is going to receive the benefit of the tax break and discounts on the products. The retailer is going to receive the benefit of increased in-store sales, and the state is going to see cross-border activity with folks from Indiana, Kentucky and Michigan … people are going to cross over that live in those border areas and shop in Ohio that weekend, so the state is going to see those additional sales they normally wouldn’t see.”
Ohio’s first sales tax holiday was in 2015. It was reauthorized every year through 2018, when it was made permanent. Locally, the sales tax rates are 6.75 percent in Trumbull and Ashtabula counties, 7.5 percent in Mahoning County and 7.25 percent in Columbiana County.
A study by the retail federation and Prosper Insights & Analytics released this month shows to meet back-to-school demands, 38 percent of consumers reported they will trim back in other spending areas.
Families also expect to spend more per person on K-12 and college items this year as a result of higher costs.
“A lot of families are cutting back in other areas so they can afford to get the items they need for back-to-school, so obviously they are prioritizing it as a must,” Miller said. “And it’s true, when you’re in this kind of environment, every little bit does help. People will cross the street in heavy traffic to save a penny on a gallon of gasoline, so from a consumer’s perspective, if they can save any money on a purchase, it’s a win, but it’s especially enjoyable when you’re not paying a tax.”
The retail federation reports back-to-school shopping is expected to match 2021’s record high of $37 billion with families of elementary and high school students planning to spend $864 on average on school items.
That $864 is about $15 more than last year, but far more than in previous years.
In 2017, the retail federation reported consumers spent $688 per household on back-to-school items — $176 less than this year. Ten years prior, per household spending was $563, a difference of $301.
Back-to-college spending is expected to reach nearly $74 billion, up from $71 billion and the most in the survey’s history.
Per household, the sum remains the same this year compared to last — about $1,200. The reason for the increase is more college students and their families plan to shop this year compared with 2021, according to the retail federation.
Yet despite no real increase year over year, per household back-to-college spending has grown greatly in the past 15 years. The retail federation’s data shows consumers will spend about $230 more this year than in 2017 and about $558 more than they did in 2007.
At the Eastwood Mall in Niles, there’s a measurable increase in shoppers this time of year.
“Conservatively, we’ll see crowds that are approximately 25 percent to 30 percent heavier than you would see on a typical weekday and sometimes much heavier on the weekends,” said Joe Bell, spokesman for mall owner Cafaro Company.
Bell added the period from late July to the end of August is second only to the holiday shopping season that traditionally starts after Thanksgiving in terms of retail impact.
“According to reports from last year’s back-to-school period, those stores that sell kids’ clothing, footwear or school supplies experienced sales increases ranging from 20 percent to 80 percent,” Bell said. “It varied from store to store, but even many retailers who don’t cater to the back-to-school consumer were benefiting with small sales bumps.”
Consumers are savvy and will start shopping earlier to ease the pain of higher prices and target sales to find the best deals. The council of retail merchants’ Miller also said consumers will pinpoint Ohio’s upcoming sales tax holiday as a way to save a bit of money.
Ohio’s sales tax holiday is 12 a.m. Friday to 11:59 p.m. Aug. 7. Over that weekend, an item of clothing $75 or less and an item of school supplies or school instructional material $20 or less is exempt from sales or use tax.
Items used in a trade or business are not exempt from the sales tax holiday.
The Ohio Department of Taxation has a complete list of frequently asked questions on its website, tax.ohio.gov, in the Help Center.
“Consumers are going to make the wisest purchases that they can, and retailers get it,” Miller said. “There is no one better at merchandising and marketing than retailers, and they know people are struggling, so they are going to put out great sales during the sales tax holiday.”
In other words, Miller expects retailers to roll out the red carpet for consumers with discounts on items that don’t fit the parameters of the holiday, but students still need, from electronics to bedding.
“They are going to do whatever they can to make sure that consumers perceive, and accurately so, that they are going to receive a benefit from going to that store because of the sales on items they are going to save tax money on, plus the ones they are not going to, but it’s still a better deal,” Miller said.
The sales tax holiday this year, Bell said, might take on more importance than ever “because of the squeeze inflation is putting on consumers.”
“Everyone seems to be looking harder for ways to make their dollars go a little further. If you are buying for multiple children and can save 6.75 percent, that’s a savings you aren’t going to ignore,” Bell said.
In 2013, the research arm of the council of retail merchants asked the University of Cincinnati Economic Center to examine the potential impact of sales tax holiday in Ohio one weekend in August using the same clothing and supply parameters.
The prediction, Miller said, was such a holiday would be a break-even for the state, but the results were far better after there was an actual holiday to study.
“They had forecast that it was going to break even, but what actually happened that first year was that sales were 6.48 percent higher than they had predicted. It was a gross increase of $8 million in sales tax collection. This was offset by $3.3 million in tax revenue from exempted items, but it was still a net gain of $4.7 million of additional tax revenue for the state.”
“And that $3.3 million offset represented a gain to consumers in sales tax savings,” she said. “The benefits continue every year as households continue to save. Households saved approximately $2.4 million in the 2016 sales tax holiday, so it really is something that is of great benefit.”
Cafaro Company has in place some promotions to “sweeten the deal” for local shoppers, Bell said. At Eastwood Mall and the other malls owned by the Cafaro Company, including two more in Ohio, shoppers who spend at least $300 from July 11 to Aug. 7 are eligible for a $25 mall gift card by presenting their receipts at the mall’s customer service center.
At Southern Park Mall in Boardman, there will be a school supply drive to help students of Boardman. Through Aug. 31, a drop-off box will be in the mall’s Center Court.