Mass. retailers: lack of sales tax holiday hurt stores in August
BOSTON — 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 percent 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."
In the Berkshires, 1Berkshire COO Jonathan Butler said he was familiar with the results of the RAM members survey, and that local merchants were also affected by the absence of this year's tax free holiday.
"I don't have any data done by any survey, but we did have a lot of conversations, fielded phone calls, and discussed it at the board level," said Butler, whose organization includes the former Berkshire Chamber of Commerce.
"Local retailers did take a hit," he said. "I think it's something they counted on every summer. I think it was the intention of the state that when they have a budget gap they need to close it. But to use something like the sales tax holiday, which is a boon to local businesses, is an unfortunate place to look."
When asked how big of a hit Berkshire merchants experienced, Butler said that data varied from sector to sector.
"I think that number that you got from the survey, which I've also seen, is about the average type of hit that a retailer takes from this," he said.
"Not having the sales tax holiday this year didn't just take away the incentive of saving a little money, it took away shopping in the first place," Butler said.
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."
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