Tennessee Lt. Governor Suggests Annual Sales Tax Holiday May Be Off the Table This Year



Lt. Governor Randy McNally (R-Oak Ridge) suggested that the annual sales tax holiday is one of the things that would not be done this summer to help compensate for the state’s revenue shortfalls.

The revelation by the lieutenant governor was included in a WBIR 10News report in conjunction with adjustments the Tennessee General Assembly expects to make to the fiscal year 2021 budget.

Before adjourning until June 1 in an effort to help contain the spread of COVID-19, the legislature passed a preliminary budget for fiscal year 2021, which begins July 1.

Governor Bill Lee’s original budget proposal for the fiscal year 2021 was for $40.8 billion, reflecting a 3.7 percent increase over the fiscal 2020 budget of $39.3 billion. It also marked the first time the state’s budget topped $40 billion.

Significant adjustments were made to both the current year’s budget and next year’s budget, due to the anticipated economic downturn.

The revenue report through March 2020 was $605.7 million ahead of the budgeted estimates for the eight-month period, The Tennessee Star reported.

Anticipating the fallout of the economic shutdown, after lowering the growth rate of the fiscal year 2020 from 3.75 to 2.5 percent, the fiscal 2021 budget projected revenue increase over 2020 was also lowered from 3.1 percent to 0.3 percent.

These actions lowered the original fiscal 2021 budget by $854 million and resulted in what the General Assembly passed in March and referred to as a “preliminary budget.”

In addition to having to cut as much as another $1 billion out of the upcoming fiscal 2021 budget,  McNally told WBIR that another $500 million shortfall may need to be made up in the current fiscal year in order to be able to “close the books.”

The sales tax holiday is set out in Tennessee law for certain items sold between the last Friday of July through the following Sunday, which would be July 31 to August 2 this year.

In preparation for the new school year, items eligible for the sales tax exemption include clothing, school supplies and school art supplies with a sales price of $100 or less and computers with a sales price of $1,500 or less.

Since the sales tax holiday is set in law, it would take a majority vote by both the House and the Senate and Lee’s signature in order to permanently remove or temporarily suspend the provision.

Sales tax accounts for about $10 billion of the state’s budget.

The sales tax holiday, while giving savings to Tennesseans shopping for children returning to school, also results in lost revenue of about $10 million for the state, a Department of Revenue representative estimated to WBIR.

While the sales tax holiday represents 0.1 percent of the state’s sales tax, it represents a mere 0.025 percent of the state’s total revenues.

Meanwhile, legislators of the 111th General Assembly have sponsored bills that would extend aspects of the sales tax holiday through a proposed “Food Tax Holiday Act,” which would exempt the retail sale of food and food ingredients from sales tax for the months of June and July 2020, and a proposal to exempt feminine hygiene products from sales tax on the annual sales tax holiday.

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Laura Baigert is a senior reporter at The Tennessee Star.






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3 Thoughts to “Tennessee Lt. Governor Suggests Annual Sales Tax Holiday May Be Off the Table This Year”

  1. 83ragtop50

    This is political stupidity at is basic form. Something that I have come to expect from the “conservative” super majority Republicans. They govern as if they are Democrats. Cut the budget and quit squeezing the financial blood out of us taxpayers.

  2. John J

    I expect this kind of rhetoric coming from a Democrat, like Mayor Cooper, but not from a leader of a super majority Republican legislature! Functionally, if they do this, it is a tax increase on every Tennessee citizen, but more importantly, on some of the most financially strapped ones!

    How about somebody in government talk about cutting something in government! There are plenty of bureaucrats sitting in one of the many State “ivory towers” in Nashville who could be early retired, furloughed or let go.

    1. Start Cleaning the Useless Bureaucrats Out

      I agree there are a bunch of overpaid executive service cronies in the Tennessee Tower. Many of the people show up make large salaries, have no personnel reporting to them. TDEC is full of them starting in Water Resources. Since they are Executive Service they can be fired at will with no questions asked.