Massachusetts legislators approved on July 31 a sales tax holiday for August 10th and 11th, giving business owners very little time to prepare for a sales tax holiday weekend. While it’s not uncommon to hear stories about legislators doing things at the last minute and is actually commonplace in many states, this fast change demanded of Massachusetts businesses certainly doesn’t make their jobs easier. When you’re in charge of sales tax, you need to be ready to implement temporary changes for sales tax holidays at the drop of a hat when legislators spring changes on businesses.
August is the most common month for sales tax holidays nationwide, with 17 states gearing up for sales tax holidays at the time of writing. Other states are abandoning sales tax holidays, including North Carolina, which is holding its last sales tax holiday this year after passing legislation to end future sales tax holidays. As sales tax becomes a more pivotal part of the state’s revenue plans, you might think that we’ll see fewer sales tax holidays in the future, especially since last year’s numbers were at 19 states, with a loss of two states this year. But can we see that happening?
The Tax Foundation, a public policy research foundation, says that sales tax holidays are “politically expedient but poor tax policy” for a number of reasons, most notably that it doesn’t create a lasting effect to relieve consumers of tax burdens and shoppers simply shift habits from one shopping trip to another to get what they need. Instead of making a change to impact tax policies, politicians use sales tax holidays to win their constituents overcome election time, says the Tax Foundation. Some states tried sales tax holidays one year and then decided it wasn’t worth the lost revenue but states that have a history of sales tax holidays are unlikely to do away with them anytime soon. Instead of figuring out that your business won’t need to deal with a sales tax holiday, make sure you have a plan in place should a sales tax holiday suddenly come your way and affect your business.