Mass. retailers: Lack of sales tax holiday hurts stores in August

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STATE HOUSE – The state’s decision not to hold a weekend-long sales tax holiday in August led to “dramatic drops in local sales and hours worked,” according to a Retailers Association of Massachusetts survey.

Eighty-six percent of RAM members surveyed said their sales dropped in August of 2016 over August 2015, declining by an average 24 percent. Three-quarters of retailers had reduced employee hours in August and half had reduced sales tax collections, according to the survey.

“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,” RAM President Jon Hurst wrote in a blog post on Monday. “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.”

Often with great fanfare, Massachusetts lawmakers in recent years have zealously approved August sales tax holidays, touting their efforts as a way to give taxpayers and local retailers an economic boost.

But for the first time since 2009, the Legislature this year chose not to grant the two-day break from sales tax for purchases made at in-state retailers. And lawmakers managed to drop the perennial program without taking a recorded vote on the matter.

Legislative leaders, expecting fiscal 2017 tax revenues to fall well below initial projections, said they were unwilling to add to an existing shortfall.

Tax collections fell well short of estimates in fiscal 2016, forcing Gov. Charlie Baker and the Legislature to reopen the state budget and take corrective steps. After a sluggish July and August, a surge in September tax collections has fiscal 2017 tax revenues running close to budgetary benchmarks, although the Baker administration on Friday reduced the state’s tax revenue estimate further, by $175 million, due to slower than projected growth in sales taxes.

The decision to eschew a sales-tax holiday was made over objections by RAM, which said that the holiday lets consumers save money while helping brick-and-mortar shops compete against their online counterparts and stores in tax-free New Hampshire.

Most retailers — 73 percent of those surveyed — held what RAM described as “we will pay the tax” promotions, offering discounts matching the 6.25 percent sales tax rate. Thirty-seven percent classified those promotions as “not effective at all,” while 3.7 percent said they were “very effective.”

Such promotions were unsuccessful this year because consumers “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.”

–Written by Katie Lannan

Copyright State House News Service