Tax holiday a ‘big deal’ for some, less so for others

Mary Lujan Ney of Santa Fe, center, walks out of Ross at the DeVargas Center with her daughters Adeline Ney, 12, right, and Sienna Ney, 7, on Tuesday. The state’s annual tax-free holiday will run Friday through Sunday, but Lujan Ney said she didn’t ‘want to deal with the crowds.’ Luis Sánchez Saturno/The New Mexican

The general manager of the Office Depot at the DeVargas Center knows that New Mexico’s annual tax holiday weekend is a big deal for many families.

For weeks in advance, Carlos Tapia has seen parents coming in to price items and asking what the savings will be if they wait until this coming weekend, when they won’t have to pay the 8.31 percent gross receipts tax — $8.31 cents on a $100 purchase but just over $83 on a $1,000 laptop computer.

“I think it’s a big deal,” Tapia said. “Laptops, printers, computers — a lot of people wait until this weekend. It can be a big savings.”

New Mexico is one of 16 states that still has a sales tax holiday, down from 19 in 2010. Critics say it’s a political gimmick that distracts from real tax reform, favors certain products and ends up giving unnecessary breaks to wealthier consumers. But the concept remains popular with shoppers and participating retailers, particularly big chains that mount promotions intended to stimulate buying.

The tax-free sales are billed as a way to help families prepare for the coming school year, though some of the exempt items — diapers, blankets and checkbook covers — don’t appear directly related to education.

The tax breaks start at 12:01 a.m. Friday, Aug. 4, and conclude at midnight Sunday, Aug. 6. The hours are important because, even if stores are closed, Apple and other internet retailers are now urging consumers in tax-holiday states to take advantage of the shopping weekend on their websites.

“Remember the day. Forget the tax,” says an email from Apple. “Buy select Apple products online or in the store during your state’s sales tax holiday and you’ll see the tax amount deducted on your receipt.” In addition to New Mexico, Florida, Louisiana, Missouri, South Carolina and Virginia will allow tax-free shopping this weekend.

The so-called back-to-school shopping weekend was enacted by then-Gov. Bill Richardson in 2005, when the state’s fiscal situation was much stronger.

This weekend, when shoppers buy specified items at participating stores, they won’t have to pay the statewide gross receipts tax of 5.12 percent or the local tax rate, which can vary but increases the total tax to a high of 9.2 percent in parts of Taos County.

There is no estimate of how much local governments lose from the weekend, but the cost to the state, which would normally get an inflow from the purchases, has been about $3.3 million annually, according to data from the state Taxation and Revenue Department. This is one example of the hundreds of tax breaks and loopholes that remain on the books while lawmakers in New Mexico have been cutting spending to education and other services as a way to balance its $6 billion operating budget.

“It’s a big deal for Taos,” said Sen. Carlos Cisneros, a Democrat who chairs the Legislature’s Tax Stabilization Committee. “It’s a win for the retailers and a win for the families. It promotes business and helps consumers — and it keeps folks from going to Colorado to shop.”

Still, tax policy experts are increasingly critical of such tax holidays, which they contend are merely feel-good events that do nothing for economic growth and help more well-to-do shoppers than those who may need it.

A new paper by the Tax Foundation, a Washington, D.C.-based policy group, concludes that consumers simply shift their buying to the tax-free weekend and that “some retailers raise prices during the holiday, reducing consumer savings.”

The report, titled “Sales Tax Holidays: Politically Expedient but Poor Tax Policy 2017,” also concludes that many of the big-ticket items exempt from taxes are out of reach to many poor families, so the savings go to higher-income earners who can afford to pay the tax. “In order to give a small amount of tax savings to those with lower incomes, tax holidays give a large amount of savings to higher-income groups as well.”

In New Mexico, there is a dollar limit to many products that qualify for the shopping weekend: Clothes and shoes must be priced less than $100 a unit; a laptop, notebook or desktop computer has to be $1,000 or less; and related hardware must be $500 or under.

But the 11 pages listing qualifying tax-free items, as determined by the New Mexico Taxation and Revenue Department, contain many only marginally related to school or education, such as ski masks, bowling shirts, and cowboy boots.

Ben Cloutier, a spokesman for the department, said the tax-free element of the weekend has pushed retailers to offer more discounts and sales to get people into stores.

“Sales are already ramping up, so we’re looking at whole week of sales going into the weekend,” Cloutier said. “Many shoppers have told us they want to get that computer and are waiting to shop. It’s still extremely popular.”

J.C. Penney in New Mexico, for instance, has announced extended hours for the weekend, along with discounted eyeglasses and $10 haircuts at its salons. The retailer also is promoting clothing and jeans with buy-one, get-a-second-for-a-penny specials.

Company spokeswoman Sarah Holland said the New Mexico stores will be open from 10 a.m. to 10 p.m. Friday and from 10 a.m. to 9 p.m. Saturday and Sunday. “We generally say this is our second busiest weekend, next to Black Friday,” she said, referring to the day after Thanksgiving.

Office Depot and OfficeMax stores in the state are promoting an array of specials, from 1-cent composition books with a minimum $5 purchase to free technical support with a computer purchase.

Lawmakers have tried to eliminate the weekend as part of efforts to streamline the state gross receipts tax system. The most recent effort came as part of an omnibus tax bill that died in May during the Legislature’s special session.

The fact that ski equipment is included in the tax-free weekend doesn’t bother Cisneros.

“Some schools up north offer opportunities for ski classes,” said Cisneros, whose district includes Taos Ski Valley. “They can buy their equipment, boots and gloves at a lesser cost. Everybody benefits.”

Contact Bruce Krasnow at brucek@sfnewmexican.com.

An earlier version of this article was published with an incorrect list of some items that are tax free. It has been amended. For a complete list go to the Taxation and Revenue Department website

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