NATICK, MA (BRAIN) Friday August 10 2012 12:34 PM MT—Massachusetts retailers are gearing up for some of their biggest days of the year this weekend, when the state's Sales Tax Holiday gets the cash registers ringing.
The state's prior tax holidays have been "invariably the busiest weekends of the year, in terms of sales, by a large margin," said Landry's Bicycles' Peter Henry.
In a promotion dating to when Mitt Romney was governor, the state waives its normal 6.25 percent sales tax on most purchases under $2,500.
The weekend doesn't require a lot of promotion, Henry said, since most Massachusetts residents are well aware of the shopping holiday. Landry's mentions the holiday in its email newsletter, and it is marking down one Trek bike model from $2,600 to $2,500, to get it into the free-tax window.
Henry said that despite the big dollar sales, he doesn't usually have to bring in extra staff for the weekend.
"So many people come in the week before and pick out what they want, then just come in on the weekend and pay for it. It's not really that hectic," he said. Henry is one of the owners of the four-store chain.
The state first held the holiday in 2004, as part of an economic stimulus package signed by Romney. Since then the state has held it every year except one.
Retailers and consumers didn't have much time to prepare for this year's, however: the state legislature approved the plan July 31 and Gov. Deval Patrick signed the bill Tuesday.
Sixteen states hold similar tax holidays, with various limitations on the types of purchases that qualify. Many states waive taxes only on back-to-school supplies and clothes for a few days in August.
Massachusetts' holiday is one of the more generous, applying to any consumer purchase of single items under $2,500. The state never taxes clothing retailing for less than $175 (Despite that, Henry said he sees an uptick in clothing sales during the tax-free weekend, anyway).
Net plus or just a shift?
The non-hectic weekend at Landry's might support some economists' skepticism about the benefit of tax holidays.
"Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases," was the conclusion of a study by the Tax Foundation, a nonpartisan tax research group based in Washington.
Henry said the holiday's novelty may have worn off.
"In the first two years (of the holiday) we saw a dramatic boost. But now I'm not sure if there really is a net plus or if people just shuffle when they are buying," he said.
Gene Kalajian, owner of Gearworks in Leominster, Massachusetts, said the tax holiday is "nothing but plus."
"We do really well with it, really well," he said. "We do not see a downturn in sales after the weekend. It's great the week before, it's great on the weekend and it's business as usual the week after."
Tom Reinke, manager of Riverside Bicycles in Newburyport, Massachusetts, said he expected the big weekend to be preceded by a soft sales day.
"Granted, sales today won't be good," Reinke said Friday. On the other hand he's had a number of customers put bikes and pricy wheelsets on hold, to pick up on the weekend, he said.
Live Free or Die
The state's northern neighbor, New Hampshire, might make Massachusetts' tax holiday more effective than other states'. That's because New Hampshire (state motto: Live Free or Die) is one of only five states with no sales tax, year round, a fact that retailers on either side of the border are keenly aware of.
The Retailers Association of Massachusetts has been a supporter of the holiday and RAM president Jon Hurst argued that the weekend allows Bay State retailers to pick up sales that would otherwise have gone to stores in New Hampshire — or the Internet.
“The smart phone is changing the consumer and our industry, giving everyone the option for sales tax holidays 365 days a year," Hurst said.
During Massachusetts' first tax holiday, New Hampshire's economic development department took out a $40,000 ad in The Boston Globe reminding consumers that every day is a holiday in the Granite State. “365 vs. 2 . . . Tax-Free Shopping Days (for those of you keeping score)," the ad read.
This year, New Hampshire Gov. John Lynch held a news conference at an outlet mall on Thursday to crow about his state's tax-free living.
Jeff Latimer at Gus' Bike Shop in North Hampton, New Hampshire, just a few miles north of the border with Massachusetts, said he's not aware of any decline in sales at his shop because of the tax holiday.
"If I had any numbers that showed that, I'd share them, but I don't see it," he said. "We're always busy in the summer."
