ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR S.B. 1152
sales tax holiday; educational supplies
Purpose
Establishes an annual transaction privilege tax holiday for the purchase of school supplies and allows a qualified teacher to offset individual income tax by an amount of unreimbursed school supplies and materials.
Background
The sales tax holiday was first instituted in New York in 1997, which provided a temporary sales tax exemption on certain items for a specific period of time. The holiday typically occurs in August, during the traditional back-to-school shopping period, and generally applies to merchandise connected with the new school year, particularly clothing, footwear and computer equipment. Twelve states have enacted sales tax holidays: Connecticut, District of Columbia, Florida, Georgia, Iowa, Massachusetts, Missouri, New York, North Carolina, South Carolina, Texas and New Mexico. Most states provide limits on the price of eligible merchandise; typically, $100 to $300 per clothing item sold and $1,500 to $4,000 for computer equipment. Any item priced under the ceiling can be purchased tax-free for the duration of the holiday.
Fiscal impact information has been requested from the Arizona Department of Revenue.
Provisions
1. Exempts school art supplies, school computer supplies, school instructional materials and school supplies that are purchased annually between August 1 and August 7 from the state and municipal transaction privilege and use tax.
2. Allows a city, town or special taxing district to levy a transaction privilege tax on the exempt items during the first seven days of August if either: 1) the governing body adopts, by a two-thirds majority, an ordinance approving the tax levy, or 2) the local electorate approves an initiative or referendum approving the tax levy.
3. Allows a qualified teacher to offset individual income tax by an amount of unreimbursed educational supplies and materials up to $250 per year.
4. Allows a qualified teacher to reduce Arizona individual income tax liability by the amount spent by qualified the teacher on educational supplies and materials greater than the claimed offset.
5. Prohibits a qualified teacher from electing an itemized deduction of unreimbursed educational supplies if the qualified teacher claimed an offset or subtraction from Arizona adjusted gross income.
6. Stipulates that the individual income tax offset for unreimbursed educational supplies is refundable and establishes a mechanism to refund offset amounts in excess of the total amount of individual income tax due.
7. Requires the Joint Legislative Income Tax Credit Review Committee to review this tax offset in 2011.
8. Contains a purpose and a legislative intent clause.
9. Defines terms.
10. Rectifies a dual enacted statute relating to the Joint Legislative Income Tax Credit Review Committee.
11. Becomes effective on the general effective date.
Prepared by Senate Research
January 17, 2006
SL/ac