In August 2015, Ohio held its first-ever sales tax holiday for clothing, school supplies and instructional materials. Before making the sales tax holiday permanent, the Ohio Senate wants to gather another year’s worth of economic data. As a result, it passed Senate Bill 264, by a vote of 31-1, to establish August 5-7, 2016 as another onetime sales tax holiday. The Ohio Chamber supports giving this idea another trial run.
Like the 2015 tax holiday, SB 264 would exempt from sales tax during the three day period purchases of school supplies and instructional materials up to $20 each. Also, of items of clothing up to $75 each. However, the bill does not exempt clothing items used in a trade or business, accessories, sports or protective equipment.
The University of Cincinnati’s Economics Center recently conducted a study of Ohio’s 2015 sales tax holiday. The report determined that consumers saved approximately $3.3 million on $46.75 million in tax-exempt back-to-school purchases. It also indicated that sales tax collections during that three-day period increased nine percent, including taxable items that were purchased in addition to those that were tax-exempt. That conclusion is bolstered by the fact that the state estimated $100 million in sales tax collections over that weekend, which netted it $4.7 million in additional sales tax revenue.
The original version of SB 264 would have made the three-day sales tax holiday permanent. Besides only having one year’s worth of data, another concern of Senate lawmakers is that while Ohio would become the 19th state to adopt some form of a sales tax holiday, no other state bordering Ohio has adopted one. (Although Pennsylvania completely exempts clothing purchases throughout the year.) The concern is that Ohio could be reaping the reward of being an “early adopter” state in our region. A benefit that might dissipate if neighboring states adopt their own tax holidays. Also, the excitement Ohioans exhibited over the 2015 tax holiday may not carry over in subsequent years. Thus, the desire is to see how much sales tax revenue is collected during this year’s tax holiday before making it permanent.
SB 264 now moves on to the House, where the Ways & Means Committee will likely begin hearings on the bill in April.