A two-day sales tax holiday, which has taken place nearly every year for more than a decade, is a lifeline for shops swamped with competition by online retailers that are always a few clicks away, the state’s top retail spokesman told lawmakers.
Retailers, who are appealing to lawmakers for help on the tax holiday and other issues, are facing the prospect of a second consecutive August without a weekend’s reprieve from the 6.25 percent sales tax. Dating back to 2004, the only other year that did not feature a sales tax holiday was 2009, right after lawmakers increased the sales tax to address a state budget crisis.
Jon Hurst, president of the Retailers Association of Massachusetts who is considering a ballot campaign to lower the sales tax, said federal and state policymakers have not sufficiently addressed the disparity between online retailers and their brick and mortar counterparts.
“For two decades they’ve dodged fixing this issue. That’s why we haven’t been able to fix it for the long-term,” Hurst said on Tuesday while testifying in front of the revenue committee. “We’re continuing to try to add lifelines like the sales tax holiday in the interim.”
Sen. Michael Brady, a Brockton Democrat and co-chairman of the committee, said as they consider the proposal lawmakers have their eye on tax revenues – which have fallen more than $400 million short of expectations this year and left officials hunting for revenue sources to plug holes in the state budget.
“We are very concerned about revenue and not having enough revenue in the commonwealth, so we’re weighing out every option,” Brady said in a statement when asked if the proposal should pass this year. Without getting into specifics, Brady said he was interested in speaking to his colleagues about the idea of potentially lessening the sales tax as opposed to eliminating it for two days.
A strategy analysis by the accounting and consulting firm PwC notes the grim outlook for Main Street stores competing against online sellers that have different overhead costs and are sometimes not required to collect and remit the sales tax.
“Although overall retail sales performance is quite strong, during the last several years essentially all of the inflation-adjusted gains in retailer revenue have been driven by online channels, which enjoy growth rates as much as 7 percent higher than retail sector growth as a whole,” the PwC analysis said. “Meanwhile, traditional retailers are faced with flat or declining sales and large, costly store networks.”
Two bills (H 1511, H 1544) would establish a permanent sales tax holiday and a bill (H 1548) filed by House Minority Leader Brad Jones would establish August 12-13 as a sales tax holiday this year, according to a bill summary.
Tobacco products, cars, purchases over $2,500 and certain other items would not be included in the tax-free holiday, under the legislation.
