Tax & Accounting Blog

A Study Questions the True Benefit of Sales Tax Holidays

Indirect Tax, ONESOURCE, Sales and Use Tax August 15, 2012

Sales tax holidays are normally viewed as a boom for retailers, but even industry advocates are conceding that this year’s tax holidays may be the toughest yet for small store owners. Some economists and tax policy experts agree that sales tax holidays do not significantly increase consumer purchasing. Instead, the highly-publicized events just mean customers postpone purchasing school supplies until they can save a few bucks.  Some store owners are finding that they must provide their own promotions during tax holidays, just to recoup sales that are lost during other parts of the year. “Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief,” according to the Tax Foundation. “If a state must offer a ‘holiday’ from its tax system, it is a sign that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, then they should cut the sales tax rate year-round.””