Briefing: Sales Tax Holiday
The state Legislature has again given consumers and retailers a break, approving an August sales tax holiday for the seventh time in eight years. This year, the tax-free holiday will take place this weekend, Aug. 11 and 12. (At press time, the measure was awaiting Gov. Deval Patrick's signature.)
What types of items will be tax-free and which are exempt from the holiday?
According to the state Department of Revenue (DOR), consumers will not be required to pay the state's 6.25-percent sales tax when purchasing otherwise taxable non-businesses items on Saturday and Sunday. Excluded are items costing more than $2,500, cell phones, meals, cars, boats, electricity and gasoline.
Some retailers can choose to offer their own discounts on more expensive items.
How much business does the tax holiday generate?
It generates an estimated $500 million in total sales, both taxed and untaxed, according to the Retailers Association of Massachusetts (RAM), which lobbies for the holiday each year. Two tax-free days drive consumers to also purchase items that are not exempt from taxes or items that don't normally require sales tax, such as clothing.
How much does the tax holiday cost the state?
In 2011, the two-day sales tax holiday cost just under $21 million in foregone tax collections, according to the DOR. Though he has approved the holiday in each year of his two terms except 2009, Patrick stated last year that the holiday may not be prudent for the state's finances.
Proponents of the holiday argue that the boost in sales cannot be counted as foregone collections because they largely would not have happened without the holiday. RAM also argues that increased income taxes that result from the higher staffing levels over the weekend help offset the cost.
Why aren’t restaurants included?
Restaurants pushed hard for their own tax holiday this year — a six-day break from the state's meals tax, which is as high as 7 percent. The measure was not successful during this legislative session.
Image credit: FreeDigitalPhotos.net.
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