RAM MEMBER SURVEY SHOWS BEACON HILL PENNYWISE, POUND FOOLISH ON SALES TAX HOLIDAY

OCT. 17, 2016 • BY JON HURST

The results of our member survey are in, and it is clear that the Beacon Hill leadership decision to forego the Sales Tax Holiday this past August resulted in dramatic drops in local sales and hours worked, with no clear benefit to the state in increased taxed collections. This is no surprise to anyone who understands consumers and the rapidly changing marketplace driven by mobile commerce. RAM firmly believes the real winners of not holding the Massachusetts Sales Tax Holiday were the tax-free mobile commerce sellers.

In these times of 365 day a year government granted tax advantages of 6.25% to out of state sellers, the state chose to not give local employers a lousy 2 days to fairly compete on the same playing field. The state did not give our own residents the clear incentive to invest their important consumer dollars locally. And that decision backfired miserably for our local employers, their employees, and for the state.

The Sales Tax Holiday has always worked in Massachusetts because the sales generated by the state tax incentive would not have otherwise happened. Sales during the tax-free weekend come from: 1. recovered tax sensitive sales—in the early years sales brought back from NH, more recently recovered from the internet; and 2. from impulse buys generated from consumers who otherwise wouldn’t be shopping. What the bean counters on Beacon Hill don’t seem to understand, is that under neither of these two scenarios did the state lose any sales tax because these were sales we simply were not going to generate and keep in the local economy otherwise.

In fact, with the exception of the Great Recession year of 2008 and the no sales tax holiday year of 2009, sales tax numbers have increased in August because of related taxed sales generated before, after and during (for goods priced over $2,500) the Sales Tax Holiday under “we pay the tax for you” promotions. Those promotions however did not work this year, as the consumer knew the real deal and knew they were going to have to pay the taxman if they were to spend their dollars in the Commonwealth. Income tax revenues will drop from the retail sector due to reduced work hours.

Here are the numbers from our member survey:
86% saw sales drops in August ’16 vs. ’15 by an average of -24%
80% were down the 2nd weekend of August by an average of -45.3%
83% were down for the combined months of July & August by an average of -19.6%
75% had reduced employee hours in August by an average of -12%
50% had reduced sales tax collections for the month of August
73% attempted “we will pay the tax” promotions with 37% finding those promotions “Not Effective at All”, 41% “Somewhat Effective” and only 3.7% as “Very Effective”
52% of the companies have competitive issues with sellers in NH
94% of the companies have competitive issues with sellers on the Internet/mobile commerce
42% sell online

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