CHICAGO (AP) – Shoppers in neighboring states like Missouri and Iowa will enjoy a back-to-school sales tax holiday, but it won’t be offered to those in Illinois.
Illinois had its last summer sales tax holiday in 2010. It won’t be among the nearly 20 states offering them this season.
“The General Assembly would have to pass legislation to put a back-to-school sales tax holiday in place,” said Terry Horstman, spokesman for the Illinois Department of Revenue.
In most states, the tax holiday has to be approved on an annual basis, and practices vary state to state because some only suspend state tax and others also suspend local sales taxes, in addition to state tax.
But sales tax holidays can be a contentious proposition. Opponents of the practice say it causes state governments to lose tax revenue, while supporters say it helps both retailers and shoppers.
Rob Karr, chief executive of the Illinois Retail Merchants Association, said the state’s consumers took advantage of the last sales tax holiday in 2010 and retailers saw an increase in sales.
Also, when Illinois doesn’t implement a sales tax holiday, the state’s retailers “definitely lose to Iowa and Missouri, but particularly Missouri” because its holiday includes computers, Karr said.
One study determined the effect of a sales tax holiday on a state’s tax revenue is likely to be largely neutral, the Chicago Tribune (http://trib.in/1IzB35K ) reported.
“The loss of revenue on exempted items is made up from consumers buying slightly more of taxable items and/or pulling in consumers from border states without such holidays,” said Julie Heath, director of the Economics Center at the University of Cincinnati, which published a report titled “Economic Analysis of the Potential Effects of a Sales Tax Holiday in Ohio” in 2013.
“It primarily serves to transfer the timing of purchases from the month before or after to the exempt month,” she said.
The center estimated that overall retail sales in Ohio would rise by almost 5 percent over a three-day sales tax holiday, but the increase in sales tax would be offset by a decrease when the purchases would have otherwise been made, due to consumers shifting their shopping plans so they’re able to take advantage of the savings on back-to-school items.
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