Retailers press case for Aug. sales tax holiday
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Mindful of the lack of action on sales tax holiday legislation, Massachusetts retailers on Tuesday called for a tax-free weekend on Aug. 15-16, which they argue would help retailers capture some business that is flowing to sales-tax-free New Hampshire or occurring online in an often tax-free environment.
Beacon Hill leaders in recent years have regularly looked to spur retail store sales during a weekend in August by suspending the 6.25 percent sales tax on items costing $2,500 or less. The focus of policymakers in recent months has been on closing state budget gaps and reining in spending. Aides to House Speaker Robert DeLeo and Gov. Charlie Baker said the two leaders generally support a sales tax holiday. An aide to Senate President Stanley Rosenberg said he was not certain of the senator's viewpoint.
A new Retailers Association of Massachusetts study, conducted by the Beacon Hill Institute at Suffolk University, concluded that suspending the tax for a weekend in August would boost sales among Massachusetts retailers $168 million, add the equivalent of 627 to 860 new full-time jobs in Massachusetts, and increase disposable income $37 million. The study estimated the state would see a drop in sales taxes of $18.7 million to $20.1 million.
Critics of the tax holiday say it just shifts consumer buying patterns while denying the state significant tax revenues, but lawmakers and governors have been swayed by the appeal of approving a short-term tax break and by predictions of more dynamic economic impacts, approving sales tax holidays during 10 of the last 11 years.
Association president Jon Hurst said the holiday was not approved in 2009, the year lawmakers raised the sales tax from 5 percent to 6.25 percent. Lawmakers have typically passed a tax holiday bill in the summer, shortly before the actual tax holiday.
"This is a position that we've been in many, many times," Hurst said. "I think both the retailers and the consumers at this point somewhat know the drill and can react quickly and gear up with little notice."
More advance notice, Hurst said, gives retailers time to plan tax holiday advertising and ensure adequate product inventories. He said the "incredible growth" of mobile commerce has pulled more shoppers away from stores and asserted the tax holiday is "more and more about returning sales that we'd never have."
In June, a spokesperson for Gov. Charlie Baker said the tax holiday issue was before the Legislature. "Governor Baker has supported sales tax holidays in the past because they give taxpayers a break and retailers a needed boost, and looks forward to working with the legislature on future proposals," said the spokesperson, Elizabeth Guyton.
Bills making the annual sales tax holiday permanent have been heard by the Legislature's Economic Development, and sales tax holiday bills are scheduled to be heard July 21 by the Revenue Committee.
The study, citing Forrester Research data, estimated the average American consumer will spend $1,738 on online shopping per year by 2016, which means they could avoid paying up to $109 in taxes if the items were taxed at a rate of 6.25 percent.
Most retailers who responded to an association survey favored continuation of the sales tax holiday, while some did not.
One retailer responded, "Massachusetts consumers would prefer to shop in Massachusetts. This event gives consumers reason NOT to shop on the internet or go to New Hampshire. Additionally, they will tend to spend more than they otherwise would have. This combination provides us with sales that we never would have received, providing a benefit to our employees, customers and Massachusetts government."
Another retailer said the holiday interrupts the flow of business. "The sales tax holiday has created more problems than benefits for us," the retailer said, according to the study. "Business is non-existent three weeks before and two weeks after. As a result, five weeks of business are crammed into two days, and the total amount of sales does not come close to five normal weeks of summer business."
The study's analysis was based on results of a poll of 450 Massachusetts consumers conducted by Opinion Dynamics for the retailers group. The poll showed 31 percent of consumers stated they had made major in-state purchases during the tax holiday that they might have otherwise made on the Internet or in New Hampshire. Sixty-eight percent indicated they had not. Twenty-three percent indicated they spent over $500 on their in-state purchases over the tax holiday.
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