This weekend, back-to-school shoppers once again will be able to buy clothes and school supplies, including certain computer equipment, without paying state gross-receipts taxes.

The annual Back-To-School Tax Holiday, now in its sixth year, is popular with consumers as well as retailers. "For our store, it's the biggest sales weekend in the month of August," Shawn Jaramillo, manager of JCPenney in the Santa Fe Place mall, said Thursday.

But with a budget crunch forcing repeated cutbacks in government spending on programs, personnel and other costs, New Mexico lawmakers almost certainly will take a serious look at whether to continue the annual tax holidays.

"Obviously, we'll be looking at all tax holidays, exemptions and loopholes," state Sen. John Arthur Smith, D-Deming, said Thursday. The Senate Finance Committee chairman and one of the Legislature's leading budget hawks, Smith said, "I haven't seen much in the way of proposed revenue enhancements, so we'll have to look at ways of closing the gap."

The tax holiday is expected to cost state and local governments about $4.5 million in tax revenues, a state Taxation and Revenue Department spokesman said this week. That's about the same as in previous years.

According to a report the department published in 2005 — after the first tax holiday — getting an accurate number for lost revenue is difficult because most businesses that pay collect receipts taxes don't file the required form.

"The range of potential tax savings from these deductions is from $3.1 million to $5.7 million," the report said. "State revenue impacts range from $1.8 million to $3.4 million, and local impacts from $1.3 million to $2.4 million."

In the city of Santa Fe, the gross-receipts tax rate is 8.0625 percent for most goods and services. The state portion of that rate is 5.125 percent, with the remainder of the tax rate generating funds for local governments. The state rate this year was increased by one-eighth of a cent on each dollar spent, an increment that went into effect last month.

Administration officials defend the tax holiday. Gov. Bill Richardson, who pushed for the first tax holiday in 2005, said in a news release, "This weekend all New Mexico families can stock up on school supplies and save some much needed cash. This kind of savings is especially important to New Mexicans right now as many families are struggling to stretch a dollar more than ever before."

Taxation and Revenue Secretary Designate Duffy Rodriguez said in a written statement this week: "This tax holiday is especially meaningful to a lot of New Mexico families and retail businesses that are struggling in these tough economic times. It's a win-win situation both to boost retail sales in our state while helping families save money."

The JCPenney manager agreed. Jaramillo said customers don't just wait to the tax holiday to purchase what they would have bought anyway. They tend to take advantage of the tax savings and buy more items, he said.

Perhaps it's a sign of the popularity of the tax holiday that the annual program hasn't been on "the chopping block" before, according to Smith, even during recent sessions when legislators were trying desperately to balance the budget.

But, the senator said, the interim Revenue Stabilization and Tax Policy Committee probably will discuss it in October or November.

The tax holiday began at 12:01 a.m. this morning and will end midnight Sunday.

Among the items that qualify for a tax-free sale are clothing or shoes priced at less than $100. Desktop, laptop and notebook computers with a price tag of $1,000 or less qualify, as do computer hardware up to $500. School supplies for use in "standard, general-education classrooms" must be under $15 per unit to qualify.

Specifically excluded from the tax holiday are watches, radios, compact disc players, MP3 players, cameras, headphones, video games, sporting equipment, portable desktop telephones, copiers, office equipment, furniture or fixtures.

There's no tax break for bathing suits or swim trunks. The same goes for ski boots, riding boots, waders, bowling shoes and shoes with cleats or spikes.

For more information, including a complete list of taxable and nontaxable items, visit www.tax.newmexico.gov/Individuals/Pages/Tax-Holiday.aspx.

Contact Steve Terrell at 986-3037 or sterrell@sfnewmexican.com.