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Tennessee's second tax-free weekend has started, this time at restaurants

From Aug. 7 through Aug. 9, the retail sale of food and drink by restaurants and limited service is exempt from sales tax.

KNOXVILLE, Tenn. — When the General Assembly passed its budget for the 2020-21 fiscal year, it included a new sales tax holiday for restaurants and a boost to the existing back-to-school shopping weekend.

The sales tax holiday on clothing, school supplies, and computers took place July 31 through August 2.  

On August 7, the state begins a sales tax holiday to give restaurants a boost during the COVID-19 pandemic. The latest figures on restaurant sales nationwide indicate business is currently down 60 percent, according to UT economic expert Bill Fox.

2020 Restaurant Sales Tax Holiday

  • Begins: Friday, August 7
  • Ends: Sunday, August 9
  • Retail sale of food and drink by restaurants and limited-service restaurants is exempt.

2020 Back-to-School Sales Tax Holiday

  • Begins:  Friday, July 31 at 12:01 a.m. 
  • Ends:  Sunday, August 2 at 11:59 p.m.  
  • Clothing with sales price of $200 or less
  • School supplies with sales price of $200 or less
  • School art supplies with sales price of $200 or less
  • Electronic devices, including but not limited to, computers and TVs, with sales price of $3,000 or less.
  • The normal price limits on eligible items was doubled this year to encourage shopping during the COVID-19 pandemic. 

In previous years, the limits were $100 on clothing and school supplies and $1,500 on computers. In 2020, the eligible items include clothing and school supplies up to $200 or less. Computers and televisions $3,000 or less are exempt from sales tax.

The Department of Revenue is in the process of updating its website to reflect the new price limits, which should take place when the governor signs the newly approved budget.

In 2021, the sales tax holiday eligible items will return to $100 and $1,500 limits, according to Department of Revenue spokesperson Kelly Cortesi. 

Bill Fox, the state's leading economic expert, said he not usually a fan of back-to-school sales tax holidays because they do not stimulate more spending. They merely change the timing of when people buy the items they were already going to buy. However, he said the COVID-19 pandemic has created a special situation.

Credit: WBIR
Bill Fox, UT Economics Professor

"In this case, I think there's logic to the sales tax holiday because the legislators are trying to change the timing of when people buy things. They want to encourage shopping to happen this summer to help businesses that are struggling," said Fox.

As for the restaurant sales tax holiday, Fox said he thinks it is laudable. However, he would have preferred a mid-week holiday rather than a weekend.

"If restaurants are going to be busy, it is usually on the weekend. My thought was it would be good to generate customers when they are normally slow. But if this can get restaurants some additional customers and revenue at a time when many are trying to stay in business, that will be a good thing," said Fox.

In May, there was some discussion among lawmakers to eliminate sales tax holidays due to budget shortfalls.  While the existing holiday was allowed to remain, the pandemic did convince the legislature to avoid approving a new tax holiday for car sales.

RELATED: June 21 - Lean times: Knox County's proposed budget features across-the-boards cuts, assumes millions less in sales tax revenue

RELATED: June 16 - Tennessee lawmakers clash over budget details

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