Bring Back the Sales Tax Holiday? We can’t afford not to.

June 27, 2017 -- By Bill Rennie, Vice President

Early last summer, our elected officials decided against reauthorizing a Sales Tax Holiday weekend for August 2016, citing that the state could not afford it.  This year we need to bring back the tax holiday, because we can’t afford not to.

The retail landscape is changing.  More and more commerce is moving online, and local sellers still find themselves at a competitive disadvantage when it comes to sales tax fairness.  Massachusetts merchants have long had to deal with the New Hampshire effect, where the draw of sales tax free shopping remains strong, but the internet is where the real competition lies.

Thousands of internet sellers continue to exploit a loophole in the law that allows them to sell into our state and avoid collecting the state’s 6.25% sales tax.  A number of states, including the Commonwealth, have tried over the years to whittle away at this problem, but until the federal government grants the states the authority to collect from all remote sellers, true sales tax parity will remain out of reach.

This past holiday season, the National Retail Federation reported that U.S. retail sales during November and December increased 4% over 2015, with non-store sales up 12.6%.  However, our annual survey of small, locally based sellers, showed a 1% drop in sales compared to the year before.

Collectively here in the Commonwealth, we need to do a better job of incentivizing consumers to spend their dollars locally, here in our economy.  Retailers want to partner with local and state governments to support our Main Streets, our local employers, our local jobs, and our tax base.  Municipalities want vibrant downtowns with a mix of commercial and residential uses, offices, shops and stores, and restaurants.  We simply cannot afford to ignore the consumer trends and small business store closures any longer.

While we continue to fight at the federal level and in the courts for national sales tax parity, the Sales Tax Holiday at least levels the playing field for a short 48 hours.  And it works.  The Sales Tax Holiday is an event that excites consumers, and the state should embrace that excitement. 

In fact, earlier this year, the Federal Reserve released a study that specifically looked at the Massachusetts Sales Tax Holidays in 2014 and 2015, and compared the data to the same weekend in 2016 when there was no tax holiday.  The study was seeking to investigate “whether the pre-announced sales tax holiday provided a net boost to retail spending over the month as a whole, as opposed to only a re-timing of spending within the month.” 

The study found that the “net effect of the tax holiday on spending for the month as a whole was moderately positive.”  Interestingly, the study also showed that while sales surged noticeably at “high exposure” store categories like furniture and appliance stores, “sales at clothing and accessory stores and at general merchandise stores also surged, suggesting that consumers reacted to the tax holiday by increasing their purchases of relatively inexpensive, semi-durable items as well.” 

The holiday boosts spending throughout the month as a whole, and even store categories like clothing sellers – despite the fact that clothing below $175.00 is not taxable – see a tremendous economic benefit. 

The Sales Tax Holiday is an important Main Street initiative to urge consumers to shop here in the Commonwealth, injecting over $500 million into our local economy in one weekend, rather than spend it online or over the border.  There is simply no better way that the state can incentivize consumers to shop and spend local. 

If we really want to support our local merchants and Main Streets, then we can’t afford not to.

Share this post:

Comments on "Bring Back the Sales Tax Holiday? We can’t afford not to."

Comments 0-5 of 0

Please login to comment