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2013 Summer Sales Tax Holidays

  • Jul 12, 2013 | Gail Cole

Update, 8.7.13: Massachusetts has decided to have a sales tax holiday on August 10 and 11, 2013.

As the mercury rises, people feel increasingly inclined to do nothing more than keep cool. While for some that might mean heading to the air-conditioned mall, for more it involves relaxing in the shade of trees, floating in oceans, lakes and rivers, and consuming buckets of lemonade, pop and beer. Shopping is just not a priority in the summertime.

This poses a challenge for retailers, for how can you sell your inventory if everyone is at the beach? Sales are one way to entice customers. Sales tax holidays are another.

Back-to-school sales tax holidays are popular, and 17 states are offering one this summer. Growth spurts and fashion necessitate new clothing before the start of the school year. Studies necessitate calculators and book bags. Purchases must be made, heat or no heat, tax or no tax.

But do retailers benefit from sales tax holidays? If not, who does?

Why have a sales tax holiday?

1. Ease the financial burden:

Florida state Representative Larry Ahern sponsored the Florida August sales tax holiday to "take some of the burden off Florida families as they prepare for their children going back to school in August." Energy star product holidays like the ones offered by Maryland, North Carolina and Texas help reduce the cost of replacing outdated, energy consuming appliances with cleaner, greener versions.

Increasingly, states are broadening the list of items covered by sales tax holidays. In South Carolina, the August back-to-school sales tax holiday now includes numerous bed and bath supplies such as sheets, blankets, towels and shower curtains. In Louisiana, the August holiday includes guns and ammunition.

2. Stimulate the economy:

The retail industry suffers when people tighten their purse strings, and sales tax holidays may get people back in shops. At the Raleigh, NC, Triangle Town Center mall, the August "tax free weekend is the only thing that comes close to the holiday season in terms of activity." The mall marketing director credits tax free shopping.

An article by The Pew Charitable Trust features a photo of approximately 100 people waiting for an Apple Store to open during the 2012 Tennessee sales tax holiday. And why not? If people are willing to spend the night outside a theater to watch the new Harry Potter film, surely they'll wait a few hours to save on sales tax.

3. Raise revenue:

Sales tax holidays may also be a good way for states to raise revenue. Although some economists worry sales tax holidays are a "drain on state treasuries," there is some evidence to the contrary (The Pew Charitable Trust). The Florida Retail Federation notes that the 2010 "3-day sales tax holiday actually generated increased revenues to the state in the amount of $7 million." Getting people to enter shops and open their wallets is the hard part. Once they're in, sales of taxable items increase, too.

The other side

Yet not all state governments are convinced sales tax holidays are a good thing. Massachusetts has held holidays in the past, but is undecided about future sales tax holidays. In North Carolina, lawmakers have proposed eliminating the tax holiday after this year. The N.C. Department of Revenue reports that the 2012 back-to-school holiday cost the state approximately $13.6 million in lost tax revenue. There's a better way, say many lawmakers, to help North Carolinians save money.

The Tax Foundation has argued that sales tax holidays "cause complexity and instability." The Institute on Taxation and Economic Policy argues that sales tax holidays don't actually boost sales, they just shift the timing of them.

Yet as Massachusetts state Senator Gale Candaras (D) has said of the sales tax holiday, "…the public likes it, people look forward to it…." And just like in high school, popularity goes a long way.

2013 July and August Sales Tax Holidays

Is your business ready for the upcoming sales tax holidays? Automation can help.

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.