Savings at a Cost: The Impact of Sales Tax Holidays [infographic]

August 29, 2013 — Leave a comment

Over the next few weeks, the autumn breeze will have swept away the sunshine and alacrity of summer, beckoning the start to a new season and a new school year. While students may dread returning to the classroom, their parents share an equally unpleasant sentiment towards the myriad of expenses associated with preparing them to do so. Thankfully, if your residency falls into one of the 17 states that participated in statewide sales tax holidays on certain back-to-school supplies this year, making it back to class on time may have been kinder to your wallet.

Related: Back-to-School Shopping Tax Breaks [infographic]

While these tax breaks may be saving the consumer in the short-term, skepticism still surrounds the large-scale economic implications of renewing these policies year after year.

According to data compiled by Georgia State University’s Fiscal Research Center, the State of Georgia will lose $89 million in revenue for providing consumers with a weekend sales tax holiday on clothing, school supplies, and computers earlier this month. The North Carolina Department of Revenue estimates that the state missed out on $13.6 million in taxes during these holidays on computer sales alone, while Massachusetts failed to collect a cool $23.3 million during their 2012 respite.

Liz Malm of the Tax Foundation, a group that opposes sales tax holidays, calls them a “short term gimmick,” and believes that the holidays simply allow consumers to shift their purchases to a part of the year in which sales tax is not in effect.

Conversely, retail trade groups have accumulated research that highlights the potential boost in state revenue that these tax holidays can create. A study conducted by the Alabama Retail Federation found that tax revenue grew between 2.4% and 10.6% in 6 of the first 7 years that the state implemented a brief sales tax holiday.

Whichever side you may find yourself on, there is no disputing the favorable impact which these holidays have upon brick-and-mortar stores; online retailers can generally offer lower prices due to the sales tax levied upon stores with a physical presence in-state.

Take a look at the infographic below, and leave us a comment letting us know where you stand on the issue!

Sales Tax Infographic

Sales Tax Infographic

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