Sales tax holiday will cost West Virginia an estimated $4.5 million

Dropping West Virginia’s 6% sales tax on certain clothing and school supplies over four days this weekend will cost the state an estimated $4.5 million in revenue, according to the West Virginia Tax Division. 

The state’s current sales tax holiday program started in 2021 and complements the West Virginia clothing voucher program in an attempt to lower the costs for back to school, the tax division said.

“Over the weekend, please take advantage,” Gov. Jim Justice said in announcing the tax holiday. “Because this is just a way to give a little assistance to all families that are putting kids back in school, and our kids will be heading back to school real, real soon.” 

The tax holiday applies to certain clothing items with an individual price of up to $125, certain laptops and tablets up to $500, certain school supplies up to $50 and certain sports equipment with a purchase price of up to $150. A complete list of what’s part of the sales tax holiday is available on the tax division’s website. 

The tax holiday runs from Friday, Aug. 4 through Monday, Aug. 7 at 11:59 p.m.

Bridget Lambert, president of the West Virginia Retailers Association, said traffic increases in large and small retail establishments in the state during the sales tax holiday, though she couldn’t say by how much.

“We believe the [sales taxes holiday] is very beneficial, and I know that our retailers prepare in advance by ordering more merchandise,” Lambert said. “They make sure that they have good quality things that the kids would appreciate having — their new backpacks, all the supplies that they’ll need for the beginning of the new school year.”

Tax policy analysts, including the Washington, D.C.-based Institute on Taxation and Economic Policy and the West Virginia Center on Budget and Policy, say sales tax holidays may not help families as much as they hurt local government. 

This year, 19 states have sales tax holidays, at a cost of nearly $1.6 billion to states and local governments, the Institute said in a brief Wednesday. 

According to the Institute, sales taxes disproportionately affect people with lower incomes because lower-income families spend bigger shares of their income on things that are subject to the tax. But sales tax holidays are too temporary and targeted to change that, according to the institute. 

Kelly Allen, director of the West Virginia Center on Budget and Policy, said she largely agrees with the Institute’s concerns. 

“Sales tax holidays are poorly targeted, costing states and municipalities a lot while giving no advantage to locally owned small businesses nor targeting help to families who need it the most,” she said. “Given that these sales tax holidays reduce tax revenues, they also have a direct harm on the public services small businesses rely upon like infrastructure and emergency response.”

The state tax division did not provide an estimate for how much the sales tax holiday will cost West Virginia cities. West Virginia municipalities collect up to 1 percent in sales taxes.

West Virginia Municipal League and the National League of Cities did not respond to requests for comment about sale tax holidays. 

Allen sales taxes are more critical to the funding of services now that the state has cut income tax by an average of 21.25%.

“Overall, there are better policy options to support small businesses and families who need it the most,” she said.