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Sales Tax Holiday in Massachusetts. Helpful or Harmful?

  • Jan 4, 2013 | Gail Cole

 Massachusetts Considers Value of Sales Tax Holidays.

Recent figures from Massachusetts highlight the questionable economic benefit of sales tax holidays.

Results from the MA August 2012 sales tax holiday resulted in estimated losses of  21 million in revenue." Other estimates report even higher losses ($23.34 million). While the sales tax holidays are intended to increase offsetting revenue in other areas, MA "indirectly raised revenues (income, corporate, and other) due to increased economic activity was less than $2.3 million."

Do sales tax holidays actually generate more sales? The Tax Foundation argues that they "do not promote economic growth or significantly increase consumer purchases… ." Rather, "evidence shows that they simply shift the timing of purchases."

By contrast, the Retailers Association of Massachusetts argues these holidays are "a big boon to store owners, who might otherwise lose customers to online retailers or tax-free New Hampshire." The conclusions of a report issued by Cape Ann Economics for the Massachusetts Main Street Fairness Coalition bears this out, referring to the "New Hampshire loss" and the fact that savvy shoppers use whatever means necessary to avoid the sales tax: they drive to neighboring, tax-free New Hampshire, or they shop on-line.

The Retailers Association of Massachusetts predicted that sales would top $500 million during the holiday -- well above the $100 million in sales more typical of an early August weekend.

Massachusetts is one of more than a dozen states that offered a sales tax holiday last year, but few permitted so many items to be sold tax-free. During the 2012 August sales tax holiday in Massachusetts, people were able to purchase "furniture, appliances, computers, and televisions" as well as less expensive items such as clothing. According to Bill Rennie, vice president of the Retailers Association of Massachusetts, the "big-ticket" purchases were the "most popular." (reuters.com).

2012 Sales Tax Holidays at a Glance

18 states offered sales tax holidays in 2012, and it's interesting to look at which states exempted what. For example:

North Carolina offers an annual sales tax holiday for Energy Star qualified products each November.

Louisiana offers an annual sales tax holiday on the "consumer purchases of firearms, ammunition, and hunting supplies… ."

Connecticut and Maryland offer an annual sales tax holiday each August on "clothing and footwear" up to a certain amount. Texas does the same, and also exempts a variety of school supplies.

Georgia offers sales tax holidays each August for clothing, back to school supplies, and a number of other items.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.