Boston- State Senator Benjamin B. Downing (D – Pittsfield) announces that on Tuesday, July 31st, the Massachusetts Senate approved an August sales tax holiday weekend. This is the third year that the Commonwealth will provide a sales tax exemption for an entire weekend, and the fourth year a tax-free day has been approved.
Downing explains that a tax-free weekend encourages consumer activity and bolsters big-ticket purchases. “Massachusetts consumers and retailers alike stand to gain from this year’s sales tax holiday weekend. Just in time for back-to-school shopping, consumers can stock up on school supplies including big purchases like computers, laptops and other necessities. Retailers will also enjoy the increased consumer activity at a time when sales are typically down.”
While some states limit the tax-free incentive to specific purchases such as clothing or energy efficient products, Massachusetts, according to the Federation of Tax Administrators, will have the most expansive and inclusive sales tax holidays. During the sales tax holiday, Massachusetts consumers are relieved from paying the 5 percent state sales tax on most purchases up to $2,500. Items exempt from the tax-free incentive include motor vehicles, motor boats, tobacco products and meals.
According to the Retailers Association of Massachusetts, total sales revenue for both 2005 and 2006 tax holiday weekends averaged $500 million. This consumer activity is comparable to that of the busy holiday season.
The Massachusetts Department of Revenue reported that last year’s tax holiday cost the state $16.9 million in revenue. This year they project lost revenue to be upwards of $17.5 million.
The Senate’s action on this legislation yesterday sent the bill to the Governor’s desk for final approval. Should Governor Patrick sign the tax holiday into law, Massachusetts will be the 15th state, plus the District of Columbia, to institute a sales tax holiday in 2007. Patrick has been quoted in the press as saying he was supportive of the proposal.