Connecticut’s 25th The annual VAT-free week – a holiday when shoppers can purchase clothes and shoes without paying sales tax – is in full swing.
In 2000, lawmakers first introduced a sales tax-free week. During this week, most clothing and shoes costing less than $100 are exempt from Connecticut’s standard 6.35 percent sales tax.
The exemption applies to each item sold, not the total amount. A buyer’s bill could be hundreds of dollars, but any item they buy that costs less than $100 is not subject to sales tax. The limit used to be $300; however, Connecticut lawmakers changed it to $100 in 2015.
This applies to the cost of an item after all discounts have been applied – including coupons, rebates and any special offers a retailer may be offering. If a store offers a buy two, get two free deal, the cost of two items cannot be averaged to make both eligible for the exemption.
Here’s what you need to know about shopping this week.
When does it run and where can I buy it?
The VAT-free week began on Sunday and lasts until Saturday, August 24th.
The holiday takes place in late summer each year and coincides with the time when parents usually buy new clothes and shoes for their children before the start of school.
The tax exemption applies to purchases made either in a Connecticut store or from an online retailer.
For the exemption to apply, full payment for an online purchase must be made during the sales fax-free week, regardless of when the item is delivered. Shipping and delivery charges for qualifying items are not taxed.
Which items are eligible?
Regular everyday clothing, shoes and sports equipment are exempt from tax. Examples include golf shirts, blouses, dresses, jeans, tracksuits, sneakers, boat shoes and socks.
Accessories such as ties, gloves, arm warmers and slippers are included, as are employee uniforms for professions such as police, firefighters and nursing.
In particular, items used for specific sporting activities – such as goggles, ice skates, ski pants and wetsuits – as well as accessories such as jewelry, hair clips, roller skates and shin guards are not permitted.
The Connecticut Department of Revenue Services provides a complete list of examples of allowable and disallowed items.
Who benefits from the VAT-free week?
DRS officials estimate that consumers will save $2 million during this holiday. But between 2016 and 2019, shoppers benefited by more than $4 million per holiday, according to estimates by nonpartisan analysts.
However, the big beneficiaries of the campaign also include stores in Connecticut, some of which make a large portion of their annual profits in mid-August.
“When (customers) are out and about and shopping and doing things, there’s a dynamic effect,” Tim Phelan, president of the Connecticut Retail Merchants Association, told the Connecticut Mirror just before the 2023 holidays. “It’s part of the retail marketing plan.”
“When you shop local, more of your hard-earned money stays in the community,” Andy Markowski, state director of the National Federation of Independent Businesses, said this week. “Main Street is the backbone of our economy, creating good-paying jobs and supporting charities that keep our communities thriving. We hope consumers will turn to local small businesses for all their purchases during this sales tax-free period.”
But the holiday also has its critics.
The Institute on Taxation and Economic Policy, a progressive policy group based in Washington, DC, published analyses this year and in 2023 that found these holidays – offered in 18 other states besides Connecticut – are too temporary to provide meaningful relief.
Given Connecticut’s standard sales tax rate of 6.35%, consumers save $6.35 for every $100 they spend – assuming each individual item of clothing or shoe costs less than $100. A family spending $300, for example, would save $19.05 thanks to the holiday.
By comparison, Gov. Ned Lamont and the General Assembly ordered the first state income tax cut since the mid-1990s in 2023, increased the tax credit for the working poor, and expanded exemptions for pension and annuity income. These changes will cost the state nearly $500 million annually, but low- and middle-income households are expected to benefit between $200 and $400 per year.
ITEP also found that these VAT exemptions primarily benefit those consumers who can afford to spend the most.
“Wealthier taxpayers often benefit most from a temporary exemption because they have more flexibility to delay the timing of their purchases and thus benefit from the tax break – an option not available to families living paycheck to paycheck,” the institute wrote in its latest analysis.
