Enjoy a tax holiday this weekend

Iowa’s annual Sales Tax Holiday is Aug. 5-6. This annual event, in which no sales tax is charged on clothing and footwear items priced under $100, is now fairly routine, but that does not mean that consumers are well-prepared, according to Barb Wollan, a human sciences specialist in family finance with Iowa State University Extension and Outreach.sales tax holiday
“Making good use of the sales tax holiday, means using it for important clothing purchases,” Wollan said. “When people simply go to a store and pick up items that catch their eye, they may realize when they get home, that they should have purchased other more necessary items instead, during the tax holiday.”
In most of Iowa, the sales tax holiday means a modest seven percent savings on clothing and footwear. However, retailers often plan sales for the same weekend, which can add significantly to the savings.
“Even seven percent adds up: if you purchase 10 clothing items at a total cost of $300, you save $21 in sales tax. That $21 might purchase a couple bags of groceries, so it does have value,” Wollan said.
Wollan reminds consumers that a reduced cost is never, in itself, enough reason to make a purchase. She recommends that consumers plan ahead, so they know what they most need or want.
“Without good planning, the sales tax holiday could actually increase costs for consumers. If they buy unimportant things on the holiday weekend, then go back later to purchase the things they really needed, their total costs are higher, and their total satisfaction may not increase proportionally,” Wollan said.
When extra purchases are made using credit cards, the added cost goes beyond the price of the item. Depending how quickly consumers pay off their credit card balances, according to Wollan, the interest on the clothing purchases may outweigh the money saved in sales tax.
For tips on how to plan ahead to maximize the benefit of Iowa’s Sales Tax Holiday, go to ISU Extension and Outreach’s MoneyTip$ blog, found at www.blogs.extension.iastate.edu/moneytips. The Sales Tax Holiday runs from 12:01 a.m. Friday, Aug. 5, through midnight, Saturday, Aug. 6, at all Iowa retailers who sell clothing and footwear. The sales tax holiday applies to items priced under $100.