More than fifteen states have an annual tax-free weekend, also known as tax holidays. A tax holiday is a subsidy for certain production or consumption activities, without collecting taxes from certain persons or predetermined subjects for a certain period of time. The tax holiday has an incentive effect for new investments by reducing the tax burden of investments, even if temporarily.
According to local researchers, households of Alabama increase purchases of clothes and shoes during the tax free weekends by 50 % more than on normal days. Items eligible for sales tax exemption may also be limited in price (for instance, clothing under 100 USD) or quantity.
In order to evaluate the tax free holidays, let’s figure out what is the tax situation in Alabama.
Taxes in Alabama
While state sales tax is 4%, additional taxes from cities and counties raise rates to 8.5%. Alabama is one of the few states that do not exempt food from sales taxes, which therefore greatly affects minorities and low-income families. Prescription drugs and insulin-related items are exempt from tax. The highest general sales tax rate in Alabama is 13.5% in Cullman County.
State income tax: 2%-5%.
Fuel tax: 0.21 USD per gallon.
Income taxes account for the third salary – 32% – and are divided into the three main federal taxes of the state of Alabama and the pension. The highest federal tax rate is 11%. This is the standard expenditure on state armaments, civil servants’ salaries, education and medicine.
5% goes to the pension fund, the rest is spent on law and order and the work of municipal services.
The tax rate can be reduced if there are dependents (but only if they are US citizens) or adopted children.
Sales tax weekends
Alabama has 2 sales tax weekends that are held annually: Severe Weather Preparedness and Back-to-School.
Severe Weather Preparedness
Since 2012, when this holiday was first held, it has been held annually on the Friday of the last full weekend of February and ends the following Sunday. In this year (2021), Alabama`s 10th Severe Weather Preparedness Sales Tax Holiday is planned to be held from February 26 to 28.
On this holiday, consumers have the opportunity to purchase the tax-free items for the natural disaster or general emergency preparedness below 60 USD and generators valued at 1,000 USD or less.
Consumers are allowed to waive state sales tax on a range of products on holidays, namely: hurricane preparedness, generators, supplies.
Back to School Sales Tax Holiday was first held in 2006. And since then it has been held annually on the third Friday in July, and ends on the following Sunday. In 2021, Back to School Sales Tax Holiday is planned to be held from July 17 to 19.
Consumers are allowed to waive state sales tax on a range of products on holidays, namely:
- clothing: 100 USD or less per item;
- computers, software, and supplies: a single purchase with a sales price of 750 USD or less;
- school supplies, school art supplies and instructional material: 50 USD or less per item;
- books: 30 USD or less per item.
A complete list of exempt items can be found on the website of Alabama Department of Revenue.
But before you decide what to buy you have to keep in mind that not every item intended for return to school are exempt from sales tax during this holiday. The following products such as newspapers, magazines, jewelry, protective or sports equipment, hair accessories, non-educational video games and technology and furniture will remain tax deductible during the Back to School Sales Tax Holiday.
Sales by mail, telephone, and the Internet are eligible for a sales tax exemption if the item is paid for and shipped to a customer within a tax-free period.
Note: Due to the pandemic, holiday dates are subject to change. Therefore, for clarification, it is advisable to look at the official websites of the state.