Arkansas Explained: What is the back-to-school sales tax holiday?

It’s not Black Friday or the holiday season, but expect Arkansas stores to be more crowded than usual this weekend. 

Saturday and Sunday mark the state’s annual sales tax holiday, created by lawmakers 15 years ago to provide a tax break to families during back-to-school shopping.

Arkansas is among 20 states that have enacted “holidays” when items like clothing and school supplies are exempt from sales taxes. Experts have debated over the effectiveness of such laws. 

Navigating the laws and figuring out which products will be exempt from sales taxes can be tricky. Here’s a guide to the sales tax holiday and its rules:

Why does Arkansas have a sales tax holiday?

The Arkansas Legislature and then-Gov. Mike Beebe in 2011 approved the measure creating a sales tax holiday for certain items during the first weekend in August. 

This year, the sales tax begins at 12:01 a.m. Saturday and ends at 11:59 p.m. Sunday. During that time, eligible items will be exempt from the state’s 6.5% sales tax as well as city and county sales taxes.

Supporters of the 2011 noted that states adjoining Arkansas had similar tax holidays tied to the start of the school year, and said Arkansas was losing revenue because of residents traveling out-of-state for deals.

Beebe had been hesitant to the idea of a sales tax holiday but agreed to sign it as part of a $35 million package of tax cuts enacted that year.

What items are exempt?

The state Department of Finance and Administration provides a list of items that are exempt during the sales tax weekend.

The items have changed little since 2011, though the Legislature in 2021 expanded it to include cell phones, laptops, tablets and computer monitors. There’s not a limit to the price or number of electronic items for the exemption.

The exemption applies to school supplies, including book bags, Crayons, lunch boxes, art supplies and pencils.

Clothing items that are less than $100 are exempt. That applies to individual items, so someone could buy as many shirts as they want that cost $99 or less and not pay sales tax, but if they buy a shirt for $101 they’d have to pay tax on that item.

Clothing accessories or equipment, including briefcases or jewelry, qualify for the exemption if they’re less than $50 per item. 

Navigating the rules isn’t always easy. While belts are eligible for the exemption, belt buckles sold separately aren’t. Sneakers qualify, but cleated athletic shoes don’t. Diapers and wedding attire are also considered eligible clothing items for the holiday.

And the exemption covers reference books and textbooks, but it won’t cover the latest bestsellers by Stephen King or John Grisham. 

Sorry, gamers, the holiday doesn’t apply to gaming systems.

What if I want to shop online?

Eligible items purchased online also qualify for the tax holiday as long as it’s delivered to an address in the state. It can arrive anytime, but the purchase must be made Saturday or Sunday.

What’s the impact of the tax holiday?

Department of Finance and Administration spokesperson Scott Hardin said the agency doesn’t have specific estimates on the impact since retailers are not required to submit figures on the tax-free sales.

“However, we can say conservatively that Arkansans are saving several million dollars this weekend,” Hardin said in an email.

When the sales tax holiday was approved in 2011, finance officials estimated it would cost the state about $2.1 million the first year.

Experts, however, have questioned the value of tax-free weekends and holidays like Arkansas’. The nonprofit Institute on Taxation and Economic Policy has said the holidays don’t address the “inherently regressive” nature of sales taxes.

“In the long run, sales tax holidays leave a regressive tax system unchanged, and the benefits of these holidays for working families are minimal,” the group said last year.

The Tax Foundation has also criticized the holidays, calling them an “inefficient vehicle” for tax relief or creating additional economic activity.

“They inject unnecessary instability into government and business revenue streams; create administrative and compliance costs for businesses, governments, and consumers; and do not promote long-term economic growth,” the group said.