State Sales Tax Lifted on Clothing Purchases

10:41 AM, Apr 1, 2012   |    comments
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ALBANY -- Yes, it's true. A tax is actually going down in New York.

A sales-tax exemption on clothing purchases under $110 will go back into effect starting April 1. It comes after the exemption was lifted in October 2010. The tax phased out starting in March 2011, with an exemption on clothes purchases under $55.

The restored tax exemption will apply to all clothes and shoes less than $110.

The state levied a full sales tax of 4 percent from October 2010 to March 2011 to raise revenue amid its fiscal woes. The state made $330 million during the period.

State Division of Budget spokesman Morris Peters said the state expected to gain $210 million from the $55-and-under exemption.

Most local counties add their own 4 percent tax to purchases. So the sales tax in New York is generally 8 percent total.

"Certainly New Yorkers are among the highest taxed in the nation and any type of relief we can provide I think we should," said Assemblyman Bill Reilich, R-Greece, Monroe County.

Reilich said the exemptions would help ease some of the tax burden on state residents, albeit in a small way. New York has among the highest taxes in the nation.

Though the exemption helps save consumers' money, retailers around the state said they hadn't seen a boon in business after the sales tax was lifted late year on clothes purchases under $55.

"I don't think it's been a big difference," said Beth Madsen, the owner of Elizabeth Boutique in Poughkeepsie. "It was better to have the exemption on everything under $110 ... I think my customers would love to see that come back."

Some retailers said the changes over the past two years have confused consumers.

"I find that the average customer isn't even aware (of the exemption)," said Cindy Geller, the owner of A Step Apart, a clothing store in Rochester. "I would often price things at $109 just to give people a break, but they often weren't aware of it and then when it changed to the $55, it was more confusing."

Geller said her customers were happier when the state instituted two weeks per year of tax-free purchases. She said the promotion of the tax-free holidays led to more sales. The tax-free weeks were popular in the 1990s when the state instituted two non-consecutive weeks per year for purchases less than $500.

"Not at all in the three years do I think (the exemptions) affected the consumer in terms of would they make a purchase or not. Maybe my store is unique but when they want something, they want it," Geller said.

The Retail Council of New York State, a trade association that represents the state's retailers, said promotion of the exemptions could help the state's clothing stores compete with neighboring states.

"From the retail industry's perspective here in New York, (the exemption) dilutes the competitive advantage that retailers enjoy in neighboring states with no sales tax on clothing, Massachusetts and Vermont," said Melissa Googas, the assistant director of government relations at the Retail Council.

According to the state Department of Taxation and Finance, only nine counties - including Chenango, Delaware, Tioga and Wayne counties - and New York City also provided the $55 exemption in the past year. All other counties imposed a sales tax of at least 3 percent.

The same nine counties will also keep the local sales-tax exemption for purchases up to $110.

Googas said the Retail Council believes that counties should be required to go along with the state's tax exemptions and suspend their taxes.

"The savings we believe would resonate better with customers because they wouldn't be charged any portion of the sales tax, state or local, and retailers would not be forced to compete with the neighboring states who have better sales-tax policies," Googas said.

Sales-tax revenue is the largest revenue source for county governments, and they've been reluctant to adopt the exemption because of their own fiscal woes.

Aaron Scholder/Gannett Albany Bureau

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