What
started as a feel-good attempt to give families a break and stimulate the
economy has turned out to be not so popular with the savvy parents of
school-age children and not all that good a way to help the economy either.
The
season of “sales tax holidays” has arrived with stores in Tennessee giving
consumers a break from paying sales taxes on Aug. 2-4 and in Mississippi on July
26-27. The timing is set to help parents pay for back-to-school supplies by
eliminating sales taxes on everything from clothes to shoes to electronics.
But some
parents say tax free weekend is not worth the effort.
“It’s a
zoo. It’s crazy that weekend. I would be out that weekend only if I needed to
make a major purchase like a computer. But even then, if you needed a computer,
you could always buy that online if you wanted to save the sales tax,” said
Debbie Penney, 49, of Cordova, mother of three children including a 12-year-old
son and an 8-year-old daughter. ”There are plenty of sales prior to, and even
after, the tax free weekend you can take advantage of.”
The
timing is not so good either because in Tennessee the tax-free weekend comes
the weekend right before the start of school for many students including those
in the new Shelby County School District, which has an opening day of Aug. 5.
For
parents who have a lot to buy and lots of children, waiting until just days
before the start of school is not practical. Savvy shoppers recognize the sales
tax holidays as a gimmick that does not save them money.
“I would
go that weekend only if I had to buy electronics, but not for general school
supplies. Usually, I find them on clearance at Wal-Mart or Walgreens right after
the school year ends and get things for the following year,” said Anji Bishop,
31, of Millington, mother of three boys and two girls, ages 5 to 12. “It is not
worth it trying to save just 10 cents on the dollar. … I just feel that you can buy items like
this cheaper at other times of the year.”
Seventeen
states this year are conducing some form of a tax free holidays, reports the
Federation of Tax Administrators. Some states set them at the same time every year
while others approve them every year depending on the political winds at the
time. Tennessee’s tax free holiday weekend, which was first conducted in 2006,
is set by state law the first weekend in August.
During
the recession of 2007 to 2009, some states suspended them due to the cost to state
government. And the costs are significant in
lost revenue to state government. Estimates are that in 2012 the state of
Tennessee did not collect between $9 and $10 million on the sales tax weekend.
Tennessee continued the sales tax holidays even when total sales tax revenues
for the state slumped during the recession
The cost
to state government is sometimes minimized by the fact that stores often work
employees more hours that weekend to accommodate the crowds, which means more
state income tax, but in Tennessee that is no benefit due to the lack of a
state income tax. Other factors that mitigate the cost to state government
happen when the tax free holidays attract shoppers from other states who then
buy items that are subject to sales tax.
“Retailers
tend to like them. Some customers like them too, but there are studies to show
that retailers will jack up the prices so the customers do not get much of a
benefit at all,” said Ronald Alt, senior manager for economic and tax policy at
the Federation of Tax Administrators. “Customers are not getting much of deal
because normally the stores would have sales to bring in people doing the shopping
for back to school.”
Alt said
most states that participate view them as a way to boost the local economy
rather than a way to help consumers. A 2012 study by the Tax Foundation, a non-partisan
tax research group, determined that despite their political popularity, sales
tax holidays are not a good idea.
“Sales tax holidays
introduce unjustifiable government distortions into the economy without
providing any significant boost to the economy. They represent a real cost for
businesses without providing substantial benefits. They are also an inefficient
means of helping low-income consumers and an ineffective means of providing
savings to consumers,” the study determined.
The study found that sales tax holidays only shift the timing of
purchases instead of increasing them, distort the economic climate by choosing
to make only some items tax free, mislead consumers about savings and also make
it difficult on retailers who have to suspend the collection of taxes for a few
days.
The retailers, however, like them as they are often used to lure
people into stores at a time when consumers are in a mood to spend. At least
one retailer defended them as good for consumers. Ursula Roman, marketing director
for Fred’s Super Dollar, which has 17 stores in the Mid-South, said she cannot
comment on the policies at other stores, but Fred’s does not suspend its
specials on the tax free weekends.
“We want
people to come into the store that weekend for sure. The tax free is just
another added benefit for customers. We run our regular ad circular specials
that weekend,” Roman said. “In fact, if customers could combine our ad specials
with the tax free and even get more savings.”
One
strategy to save on sales tax without buying on the sales tax holidays is to
shop consignment sales. Tennessee law allows organizations to conduct two
consignment sales per year and not charge the customers sales tax, said Barbara
Sampson, assistant commissioner for the Tennessee Department of Revenue.
Another
idea is to buy online, where sales tax is not collected in Tennessee if a
consumer is buying from a store outside the state or a store that has not
agreed to voluntarily collect sales tax. But Sampson said consumers are obligated
to pay a use tax even though most consumers do not bother with it.
All
agree that stores will be crowded as they always are that weekend. Michael
Holland, 41, of Memphis, father of a 2-year-old daughter going to pre-school
said he will shop on the sales tax holiday only for a big ticket item.
“It
would make sense for me with a computer or maybe some of the more expensive
clothing items, but not for the regular everyday items. You could find better
sales another time of the year, and on that weekend those kinds of sales are
hard to find,” Holland said. “It may be kind of a gimmick, but sales tax is
high around here so on a big ticket item is where it makes sense.”