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Sales Tax Holidays: Big Savings or Big Cost?

SS$S SS S SSSS SALES TAX HOLIDAYS: BIG SAVINGS OR BIG COST? Sales tax holidays are a time when state governments give consumers a "break" on sales taxes for a designated period on targeted products such as back-to-school supplies, clothing, computers, hurricane preparedness supplies and products that bear the Energy Star label. How generous! This year, 19 states are offering sales tax holidays." Sales tax I holidays For more specific information on state sales tax holidays, visit: salestaxinstitute.com/resources/tax-holidays The National Retail Federation even lobbied in 2008 for a national sales tax holiday.2 The NRF noted "By temporarily lifting the sales tax for the three---:00000day periods NRF estimates that consumers could save nearly $20,000,000,000. Based on the AAAAAÂ 112.4 MILLION HOUSEHOLDS AAAAAAAA in the United States, the figure would amount to almost for the average family." $175 $175 could feed a family of four for one week by USDA standards. Wow! That's a great deal! An analysis of the Economic Impact of the 2010 Back to School Sales Tax Holiday in Florida“ showed that: Sales of all goods grew by about 50% and sales of 50% 35% non-holiday goods grew by 35% when compared to the previous year without a holiday. NON-HOLIDAY ALL GOODS GOODS On average, the transaction count increased by 37% and 39% during the tax 37% PRIOR YEAR holiday when compared with the prior year and week respectively. 39% PRIOR WEEK Major retailers added labor to deal with higher sales levels during the tax holiday. On average, they added 8,300 payroll hours over the three-day event. Yet, the Tax Foundation isn't so sure about those claims5 and the NRF's request for a national sales tax holiday didn't fly on a national level. But why? It appears to be so good for consumers and for retailers! For one, the NRF's estimate was a little high. Let's look at the savings of a shopper in Atlanta, Georgia during their Sales Tax Holiday, which covers general school supplies, some clothing, computers and E-Reader 200.00 Flash Drives 17.88 Lunch Boxes computer accessories: 2 @ 15 30.00 Pens 6 @ 1.41 8.46 Notebooks 6 @ 9.49 56.94 Shoes 2 pairs @ 64.60 129.20 Jeans & T-Shirts 4 @ 61.52 246.08 subtotal: 688.56 average amount spent on back-to-school supplies Atlanta, GA sales tax: 8% average savings: 55.08 Ok, so that's not the $175 that was promised, but it's something! Well, while sales tax holidays may August appear to save taxpayers money, it actually COSTS taxpayers S M T W TFS because of the loss of revenue for states – particularly if 10 11 customers simply shift the dates 12 13 14 15 16 17 18 of their purchases rather than 19 20 21 22 23 24 25 26 27 28 29 30 31 increasing the amount they buy due to the sales tax savings." For example, in North Carolina, where the sales tax generates nearly a third of the state's revenue, Sales tax revenue the sales tax holiday results in the loss of $TWELVE 'in revenue MILLIONear each When states don't collect revenue from sales tax, they have to tax elsewhere. ee REGARDLESS OF THE CLAIMS OF RETAIL GROUPS, LEGISLATORS WHO SUPPORT A TAX HOLIDAY ARE ENSURING THAT THEIR STATE WILL BE FORCED TO LOOK FOR REVENUE RAISERS IN SOME OTHER PART OF "9 THE BUDGET. Mark Robyn, Tax Foundation economist The Tax Foundation has an alternative to sales tax holidays - 22008, New Jersey Republicans estimated that their SALES TAX HOLIDAY would produce a static revenue loss of $500 MILLION; alternatively, that money could be used to cut the sales tax rate from 7.0% TO 6.6% (3.3% in enterprise zones) for the entire year. $ $ $$$ $ $ $ $$$ $ $ $ $ $ $$ $$ It's not sexy, but such a change would put the same money back in taxpayers' hands without the distortions.10 We ask you: If tax relief is good for a few days, why not give it all year long? Sales tax holidays are a trip! Give YETTER a O if you need help navigating through all the numbers and complexities. Contact YETTER today at 312.701.1800 or visit: yettertax.com and salestaxinstitute.com 1. http://www.salestaxinstitute.com/resources/tax-holidays 2. http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=625 3. http://www.cnpp.usda.gov/Publications/FoodPlans/2011/CostoffoodMay2011.pdf 4. http://www.frf.org/files/weg 2011.pdf 5. http://www.bna.com/blogs _post.aspx?id=2147485213&blogid=97 6. http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=1405 7. http://taxfoundation.org/blog/colorado-lawmakers-reject-sales-tax-holiday 8. http://www.newsobserver.com/2011/08/05/1390434/sales-tax-holidays-and-twisted.html#storylink=misearch 9. http://www.bna.com/blogs_post.aspx?id=2147485213&blogid=97 10. http://taxfoundation.org/blog/new-jersey-republicans-propose-sales-tax-holiday tax meets technology. yettertax.com

Sales Tax Holidays: Big Savings or Big Cost?

shared by dlyetter on Aug 02
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Sales tax holiday season is here, with many states giving consumers a “break” on sales taxes for a designated period on targeted products such as back-to-school supplies, clothing, computers, hurr...

Publisher

YETTER

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batesmeron

Tags

sales tax

Category

Economy
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