This weekend is Massachusetts’ annual sales tax-free day, when many items under $2,500 are exempt from the 6.25% surcharge.
Diana Szynal is president of the Springfield Regional Chamber, a business group. She said many retailers are getting more creative in their efforts to attract shoppers.
“Some of the smaller, local businesses are doing really great outreach leading up to this weekend. They’re offering people things to do before they go shopping and things like that that can really draw people in for the weekend,” Szynal said.
Certain items, such as alcohol, tobacco and marijuana, are exempt from sales tax on this holiday. Food and clothing are not always subject to sales tax in Massachusetts.
The initiative, however, comes at a price. It is estimated that the tax-free weekend cost the Massachusetts state government about $36 million in uncollected tax revenue last year.
Marco Guzman, a senior policy analyst at the Institute on Taxation and Economic Policy, said state governments may be sorely missing the revenue lost through sales tax exemptions right now.
“There are states that are struggling with some of their current revenues and budgets because their budgets are not exactly supported by the pandemic relief,” Guzman said.
ITEP estimates that states will lose $1.3 billion in revenue this year due to sales tax exemptions.
Guzman also said research suggests sales tax exemptions do not provide the intended benefits for lower-income people, who often have less financial flexibility to schedule purchases around the time of events. He also said a temporary tax break does not provide long-term financial relief for those who need it.
He added that retailers sometimes reduce their offers or increase prices when sales tax is not collected.
In Massachusetts, a law was passed in 2018 making a sales tax-free weekend permanent, after various variations had existed earlier in the century. It is now the responsibility of the legislature to schedule the event each year.
Some lawmakers argue that moving the holiday to August, when business is sometimes slow, could give a boost to retail.
