Bill Summary – FastDemocracy

SB 510
                      Department of Legislative Services
                             Maryland General Assembly
                                   2021 Session
                           FISCAL AND POLICY NOTE
                                 Third Reader
Senate Bill 510                 (Senator Simonaire)
Budget and Taxation                                                      Ways and Means
     Sales and Use Tax - Tax-Free Period for Back-to-School Shopping - Sale of
                                   Sewing Items
This bill exempts from the State sales and use tax the sale of sewing items (costing $100
or less) purchased during the annual sales and use tax-free period for back-to-school
shopping. Sewing item is defined as any material used to make clothing and includes fabric,
thread, zippers, bias tape, and elastic. A sewing item does not include sewing machines or
sewing tools, such as pins, cushions, scissors, and needles. The bill takes effect
July 1, 2021.
                                    Fiscal Summary
State Effect: General fund revenues decrease beginning in FY 2022. Under one set of
assumptions, general fund revenues decrease by approximately $45,000 annually
beginning in FY 2022. General fund expenditures increase by $81,300 in FY 2022.
Local Effect: None.
Small Business Effect: Minimal.
                                        Analysis
Current Law: Chapter 6 of the 2007 special session created two annual sales tax-free
periods: one in February for the purchase of specified Energy Star products or solar hot
water heaters and one in August for the purchase of any item of clothing or footwear,
excluding accessories, if the taxable price of the item of clothing or footwear is $100 or
less.
Chapters 236 and 237 of 2017 exempt from the State sales and use tax the first $40 of the
taxable price of any backpack or bookbag purchased during the annual sales and use
tax-free period for back-to-school shopping.
The tax-free back-to-school shopping period extends from the second Sunday in August
through the following Saturday.
State Sales and Use Tax
The sales and use tax is the State’s second largest source of general fund revenue,
accounting for approximately $4.7 billion in fiscal 2021 and $4.9 billion in fiscal 2022,
according to the December 2020 revenue forecast. Exhibit 1 shows the sales and use tax
rates in surrounding states and the District of Columbia.
                                       Exhibit 1
             Sales and Use Tax Rates in Maryland and Surrounding States
 Delaware                   0.0%
 District of Columbia       6.0%; 10.0% for liquor sold for on-the-premises consumption,
                            soft drinks sold for on-the-premises consumption, and restaurant
                            meals; 10.25% for alcoholic beverages for consumption off the
                            premises, tickets to specified sporting events, and specified
                            rental vehicles; and 8.0% for specified soft drinks
 Maryland                   6.0%; 9.0% for alcoholic beverages
 Pennsylvania               6.0% plus 1.0% or 2.0% in certain local jurisdictions
 Virginia*                  5.3%; 2.5% for eligible food items; 2.5% for specified essential
                            personal hygiene items; both rates include 1.0% for local jurisdictions
 West Virginia              6.0% plus 1.0% in all municipalities
*An additional state tax of 0.7% is imposed in localities in Central Virginia, Northern Virginia, and the
Hampton Roads region, 1.0% is imposed in Halifax County, and an additional 1.7% is imposed in localities
in the Historic Triangle.
State Fiscal Effect: General fund revenues decrease beginning in fiscal 2022. The amount
of the revenue decrease depends on the quantity and cost of sewing items that are purchased
during the sales and use tax holiday each year, neither of which can be reliably estimated.
SB 510/ Page 2
IBISWorld, a global market research company, reports that in 2020 fabric, craft, and
sewing supply stores in the United States had approximately $3.6 billion in revenue.
Three national retailers account for approximately 52% of industry revenues. Revenues
include the sale of sewing machines and other sewing supplies that are not eligible for the
exemption under the bill. If, for illustrative purposes only, (1) sales of sewing supplies in
Maryland represent 1.8% of the national total; (2) 30% of sales are eligible for the
exemption during the annual one week sales and use tax holiday; and (3) two weeks of
sewing supply sales occur during the sales and use tax holiday, general fund revenues
decrease by approximately $45,000 annually beginning in fiscal 2022.
The Comptroller’s Office will incur a one-time expenditure increase of $81,300 in
fiscal 2022 to notify the approximately 130,000 sales and use tax account holders of the
sales tax change.
                                Additional Information
Prior Introductions: None.
Designated Cross File: None.
Information Source(s): Comptroller’s Office; IBISWorld; Department of Legislative
Services
Fiscal Note History:      First Reader - January 31, 2021
rh/hlb                    Third Reader - February 18, 2021
Analysis by: Michael Sanelli                            Direct Inquiries to:
                                                        (410) 946-5510
                                                        (301) 970-5510
SB 510/ Page 3
Statutes affected: 
Text - First - Sales and Use Tax - Tax-Free Period for Back-to-School Shopping - Sale of Sewing Items: 11-228 Tax General
Text - Third - Sales and Use Tax - Tax-Free Period for Back-to-School Shopping - Sale of Sewing Items: 11-228 Tax General