🔒Retailers expect boost after CT expands sales tax holiday limit

Connecticut retailers expect one of the busiest back-to-school shopping seasons in years after state lawmakers approved the most significant expansion of the annual Sales Tax Free Week in more than a decade.

Beginning with this year’s tax holiday, scheduled for Aug. 16-22, shoppers can buy qualifying clothing, footwear, backpacks and school supplies costing up to $300 per item without paying the state’s 6.35% sales tax.

The previous limit was $100 per item.

The changes, approved earlier this year by the General Assembly, restore the $300 threshold that lawmakers lowered in 2015 during the state’s budget crisis. The legislation also expands the list of eligible merchandise and creates a separate year-round sales tax exemption for many nonelectronic school supplies.

The state estimates the expanded tax holiday will reduce revenue by about $3 million — less than 0.05% of the roughly $6.5 billion Connecticut collects annually from sales and use taxes. Last year’s fiscal analysis projected the tax holiday would reduce revenue by between $2 million and $3 million.

Retailers say the new threshold better reflects today’s higher prices and should encourage shoppers to spend more during one of the busiest retail periods outside the holiday season.

“Prices have gone up on everything,” said Kate Terricciano, president of Southington-based Image Marketing Consultants, which represents shopping centers that include The Shops at Evergreen Walk in South Windsor, West Hartford’s Blue Back Square and Connecticut Post Mall in Milford. “Sometimes you get your kid a pair of sneakers, and they’re easily $150. Now we’re happy that the state has kept up with those consumer trends.”

Terricciano said the expanded tax holiday should draw not only back-to-school shoppers but also consumers looking to buy fall clothing or get an early start on holiday shopping.

“We’re hoping to see those bigger purchases — coats, shoes, boots, new fall wardrobe updates,” she said.

‘Bigger than Black Friday’

For some retailers, the higher threshold restores a promotion that had lost much of its impact after the state lowered the qualifying purchase limit to $100.

Stephen Bosse, executive vice president of the New Balance location at The Shops at Evergreen Walk, said virtually every shoe and clothing item in his store will now qualify for the tax exemption.

“When it went down to $100, it just crushed the week,” Bosse said, noting that many athletic shoes now cost well over that amount.

He expects shoppers to respond quickly.

“The $300 is a really nice relief for people,” Bosse said. “We have families of four to six that come in here. It adds up very quickly.”

The annual sales tax holiday has become so important to Bosse’s business that he said it surpasses even the holiday shopping season.

“Tax-free week for us in this retail location is bigger than any week of the year,” he said. “Bigger than Black Friday. Bigger than Christmas. … We do more business in that one week than in some months.”

Connor Nolan, vice president of leasing for Greenwich-based Brand Street Properties, owner of The Shops at Evergreen Walk and Blue Back Square, said the expanded threshold should particularly benefit retailers that sell higher-priced apparel and footwear.

He expects stores such as Lululemon, L.L.Bean, J.Crew Factory and Gap Factory to benefit because more of their merchandise now qualifies for the exemption.

“We actually see a pretty meaningful foot traffic increase every year that this comes about,” Nolan said. “I think this year might be more than others because of the increase in incentive.”

Connecticut Post Mall, Trumbull Mall and The SoNo Collection in Norwalk also plan promotions and family events during tax-free week to capitalize on the increased interest.

Kelly Hapken, regional marketing director for Centennial Real Estate, which owns those three retail centers, said the higher threshold allows shoppers to purchase higher-quality and name-brand merchandise while stretching family budgets further.

“It makes it easier for families with multiple children to consolidate their shopping into fewer trips,” she said.

Hapken also expects shoppers without school-age children to participate.

“We do see a nice uptick in traffic from all demographics during that week,” she said.

More competitive

The retail industry hopes the changes will also help independent businesses compete with online retailers and neighboring states.

Andrew Markowski, Connecticut state director for the National Federation of Independent Business, said his organization supported expanding the tax holiday because inflation rendered the $100 limit outdated.

He said the changes also make Connecticut more competitive with neighboring states. Massachusetts, for example, holds its sales tax holiday over one weekend but permanently exempts some clothing purchases under $175 from the sales tax.

“NFIB would love to see some permanent exemptions,” he said. “Consumers are very price sensitive right now. So this kind of economic stimulation and attention is positive.”

However, not everyone agrees that sales tax holidays provide a meaningful economic benefit.

The Tax Foundation, a Washington, D.C.-based tax policy research organization, argues that such programs largely shift purchases consumers would have made anyway rather than generating significant new economic activity. The group says the holidays, now offered in 20 states, reduce state tax collections while providing little long-term economic benefit.

Supporters counter that concentrating shopping during a designated week provides meaningful savings to families while generating additional foot traffic for retailers, restaurants and other businesses near shopping centers.

“People are being more cautious with their money,” Bosse said. “Any savings can help.”