Online Plus Edition Saturday-Sunday, August 14-15, 2004
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Tax holiday is boon for some businesses, headache for othersBy Kathleen McLaughlin and Christine Gillett If you're thinking about making a major purchase, you might want to wait a few days. That's because for one day, this Saturday, the state will let you buy nearly anything that costs less than $2,500 without paying sales tax. So you can't buy a new car, but other big-ticket items like furniture, appliances and electronics will cost you 5 percent less than it will the 364 other days of the year. Aaron Millett of Riverside Cycles in Newburyport said he didn't know that the tax-free day was coming up but now he plans to build a promotion around it. "Sales tax is insignificant, but there's a perceived savings for the consumer," he said. Massachusetts is the 10th state to declare a holiday on sales tax. Passed last year by the Legislature as part of an economic stimulus package, the tax-free day will cost the state $6 million to $10 million, the Department of Revenue estimates. While most states that have held tax holidays offer breaks just on clothing, school supplies and computers, the only exceptions in Massachusetts will be cars, boats, utilities and restaurant meals. Linens 'n Things is among the retailers getting aggressive about trying to capture sales on Saturday, with fliers posted around its Danvers store and being handed out at checkout lines to customers making purchases. While store representatives didn't want to speak on the record, the fliers and signs encourage shoppers to come in on Saturday ready to buy. Tri City Sales in Salem is also making its move with promotions - including calling past customers to let them know about the tax-free day - and expects as much as a 30 percent bump in sales Saturday on items from refrigerators to TVs and stoves, said Charles Hurley, sales manager. "We just found out last week (from a customer)," Hurley said, adding that the business, which also has an Ipswich location, will bring in extra staff and even tell customers to wait to make a purchase. "We're going to try to really promote it and if anyone's not in a hurry, we're telling them to come in Saturday." But not all local businesses were aware of the one-day pass on sales tax in time to mount campaigns of their own. "I didn't know anything about it," said Bob McDonald, service manager at Richard's Maytag, which sells appliances in Ipswich and Salisbury. McDonald said he's "very surprised" the state would waive sales tax on items less than $2,500 - which applies to most of Richard's inventory - for a day. "It might be an incentive enough to come in and buy something" for customers, he said. As a small business, McDonald said, Richard's is open on Saturday not to compete with Home Depot, Best Buy or Sears, but as a convenience for customers. "Unless we had some particular incentive or marketing or advertising, Saturday's not going to be a busy day for us," he said. "If we had put information out on this, it could be a busy day for us." For retailers that sell goods that usually aren't taxable, Saturday's tax-free holiday threatens to "siphon off" sales, said Mark Adrian Farber, owner of Mark Adrian Shoes in Gloucester. "We're not particularly looking forward to the tax holiday, because there's no tax on shoes anyway, and it's going to have the effect of...filtering people out from buying ordinarily tax-free products in favor of taxable products on that day," Adrian said. Saturday is usually the busiest day of the week for the Main Street shoe store, and Adrian said he'll be happy if he can make the usual number of sales this week but, he said, "I can't imagine people would be rushing in here." More foot traffic for other downtown retail businesses might help, he said, but "I don't expect people to use us as a destination store on that day." Department of Revenue spokesman Tim Connolly said the state has notified retailers through e-mail sent to tax professionals. Other than the personal-use certification, he said, there won't be any special forms to use. The department also issued a bulletin on how to deal with special circumstances, such as layaway purchases, coupons and taxes collected by mistake. "We've been in contact with the DOR, so we have all the personal-use forms," said Hurley. While the state is willing to take the loss for the day, the economic benefit is questionable, according to a retail consultant. Consumers tend to latch onto tax savings. But whether the holidays generate additional sales is unclear, and the red tape involved with the holiday can make it something of a headache for retailers. "It simply accelerates or delays purchases," Chicago-based retail consultant Diane Yetter said. "If you were not in the market for a big-screen TV, would you go out and buy one just because you could save 5 percent? It's probably more just shifting." Yetter said her clients, for whom she helps manage sales tax reporting, don't like the holidays because they aren't worth the hassle of reprogramming systems. She said the dollar-amount criteria in Massachusetts, instead of a list of specific items, might be easier to deal with, however. One drawback is that people buying items worth $1,000 or more will have to sign a statement promising that the purchase is for personal use, she said. Stores will have to keep those records for three years. "This is just one of many things that makes sales tax so confusing," said Jon Abolins, senior vice president of operations at Taxware, a Salem company that makes software to automatically calculate and remit taxes. Taxware's customers include Home Depot, Wal-Mart and other multistate businesses. "It is very gimmicky," Abolins said of the holiday. "This is a pretty cheap tax break to make for a state. People love to shop tax-free." The addition of Massachusetts to the list of states offering tax holidays was not enough to prompt any new software sales, Abolins said. The company will automatically update the software for its customers. * * * Information on provisions of the tax holiday, including the purchaser's personal-use certification form, are available online at www.dor.state.ma.us/
Staff Writers
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