Shoppers in Massachusetts can look forward to a sales tax holiday later this month. The Massachusetts legislature in the closing minutes of the legislative session last week set the sales tax-free shopping days for August 16 and 17.
The sales tax holiday was included in a comprehensive economic development bill that contains dozens of programs and incentives designed to create jobs. State Senator Gale Candaras of Wilbraham, who helped write the bill, acknowledges there is scant evidence the sales tax holiday does much to grow the Massachusetts economy.
"But, it is a very popular event every year. People love to see the government go without its taxes."
During the two days, August 16 and 17, the 6.25 percent sales tax will be waived for purchases less than $2,500. Exceptions include motor vehicles, boats, tobacco and food.
Critics of the sales tax holiday say it costs the state $20 - $25 million in lost revenue. Jeff Ciuffreda, president of the Greater Springfield Area Chamber of Commerce, said the sales tax-free shopping results in more working hours for retail employees and drives more discretionary spending.
" The state is running a small surplus and so this is a little bit of a gift back to those who helped amass that surplus by letting us shop tax-free for a weekend."
Stores began advertising the sales tax-free weekend even before the legislature voted to set the dates.
The first sales tax-free shopping in Massachusetts started as a one-day event in 2004. There has been a sales-tax free shopping weekend in each of the last nine years except 2009 when the state was grappling with recession-driven budget cuts. That was the year the legislature raised the sales tax to 6.25 percent from 5 percent.
Eighteen states have annual sales tax-free shopping days, but Massachusetts is the only one where it is not set permanently by statute, according to Jon Hurst, head of the Retailers Association of Massachusetts.
" We get it. There are some in the legislature that would prefer it become a question and reviewed each year. We are far better with that scenario than to not have a sales tax holiday."
Hurst said it is estimated retailers do $500 million in sales during the two days the sales tax is waived.
" For some stores it can be as much as 10 percent of their total sales attributable to the sales tax holiday."
Hurst said the sales tax holiday weekend can also help local merchants recover sales that would otherwise go to New Hampshire, which has no sales tax, or to shopping sites on the internet that do not collect the Massachusetts sales tax.
" There are a lot of tax-sensitive consumers out there today who will purchase through their internet options or go to New Hampshire to save that 6.25 percent sales tax."
The retailers association did a study last year that estimated Massachusetts was losing $400 million in sales tax revenue annually to internet sales. Merchants are not required to collect the state sales tax unless their business has a physical presence in the state.
Massachusetts and Amazon struck a deal that had the largest online retailer start collecting the state sales tax on purchases starting late last year.