Legislature Advances Sales Tax Holiday
With one legislative committee already on board, the popular, annual sales tax holiday weekend bill appears on track for advancement.
This year's bill would create two tax-free days the weekend of Aug. 11 and 12, exempting a wide variety of products from the state's 6.25-percent sales tax. The bill is limited to retail sales and doesn't include purchases of motor vehicles and boats, cell phones or items that cost more than $2,500.
"Ours is one of the shortest holidays, however it's also one of the broadest. It covers virtually everything," said Jon Hurst, president of the Retailers Association of Massachusetts. "We hope that the Legislature and the governor support it again this year."
The bill also has the support of House Speaker Robert DeLeo. "The speaker's been supportive of it in the past, and if it can be done again, he'd like that to happen," said DeLeo's spokesman, Seth Gitell.
Last year, Gov. Deval Patrick called the holiday "popular" but not necessarily "prudent," yet signed the bill Aug. 1, two weeks ahead of the tax holiday. The nearly annual sales tax holiday began in 2004, but skipped a year in 2009 when, amid falling revenues, the state raised the sales tax and rejected the tax holiday.
This year's bill was automatically sent out of committee with a negative recommendation at first because the Joint Committee on Economic Development and Emerging Technologies missed a reporting deadline. After the Senate sent the bill back to the committee, the panel unanimously endorsed the bill by an email poll last Wednesday.
Though the bill was voted out to the Senate clerk's office, it will travel downstairs to the House clerk's office first because it's a tax bill, and tax bills must first come out of the House. The likely first stop for the bill would be the House Ways and Means Committee.
Annual Debate
Proponents of the bill have successfully passed it six of the seven times it has come up since 2004, but every year the debate is rehashed because lawmakers have opted against making the holiday permanent. Though he supports the holiday, Hurst said he understood the strategy of not making it an automatically recurring event because consumers might postpone all their major purchases until mid-August.
"On the one hand it would be nice to have it annually planned and automatic but I understand the thought process of keeping it a year-by-year decision to see how the budget revenues are doing," said Hurst, though he claimed the holiday is revenue-neutral for the state because it spurs lots of taxable spending, including outlays on meals and the payroll taxes for employees brought in to handle the rush.
Opponents of the bill had argued in 2009 that it was unwise to offer a sales tax holiday when the state is in a fiscal crisis. At the time, Rep. Jay Kaufman, D-Lexington, called the holiday "a gimmick."
Hurst said retailers will often offer a 6.25-percent discount on big-ticket items that are over the $2,500 cap, thereby mimicking the sales tax holiday while allowing the state to collect taxes on those expensive purchases.
The holiday drives shoppers to electronics, furniture and jewelry stores but also to clothing stores, where most of the items are already tax-free, Hurst said. The weekend, which can rival a December weekend in sales, gives local stores a leg-up on online retailers who are mostly able to skirt the state's sales tax, he said.
"With each passing year it's becoming more and more important," said Hurst. "You can buy sales tax free 365 days a year, 24 hours a day from a large number of online sellers, right from your smartphone."
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