Response to What's the Hubbub over ending Sales Tax Holiday

By Christie Burns, North Carolina Retail Merchants Association, August 2, 2103.

A dollar saved is a dollar earned. Ask consumers why they stock up on manufacturer coupons to save $10-$20 at the grocery store on double coupon days? They simply want their hard-earned money to stretch further in this continued challenging economy.

The reason the Sales Tax Holiday has been enormously successful for the last ten years is because North Carolina consumers value greatly the additional savings of the combination of retail sales discounts and no sales tax on certain items. For example, a pair of cleats that normally sell for $50 may be 20% off and then with the absence of sales tax, a consumer has saved approximately 27% or $13 on this purchase. That is $13 dollars that can then be applied to school supplies (which will also undoubtedly be on sale) or groceries.

Part of the reasoning behind eliminating Sales Tax Holiday is that while it saves North Carolina consumers $14.7 million in sales tax, the Department of Revenue estimates that it costs the state the same amount in lost sales tax revenue.

However, a study conducted by The Washington Economics Group that analyzed the revenues of the state of Florida in 2009, when there was no Sales Tax Holiday, and in 2010, when Florida held one, determined that the Sales Tax Holiday resulted in higher tax collections for the state. This is because many consumers plowed the savings into the purchase of other necessary items subject to the tax. Taxable sales of items related to the 2010 tax holiday grew by $115 million!

The Sales Tax Holiday spurs employment and payroll taxes as well. On average, retailers add 8,300 payroll hours over the three-day event. NCRMA and state legislators initiated the Sales Tax Holiday to encourage North Carolina residents to buy from in-state retailers rather than in surrounding states or online, and that has resulted in the period becoming the second busiest shopping season of the year.

It is the NC Merchants Association’s studied opinion that when the Sales Tax Holiday goes away next year, we’re going to see North Carolina residents that live in bordering counties cross state lines to shop other states’ sales tax holidays or choose to shop online where online-only retailers are not required to collect and remit sales tax any day of the year. And as South Carolina Regional Chamber President Rob Youngblood said in an AP article, he is waiting for next year’s tax-free holiday to bring shoppers from just over the line in Charlotte and Mecklenburg County. Youngblood also said the tax holiday will provide additional revenue once people reach his county’s stores. “The thing is, one feeds the other. We have a low gas tax as well,” he was quoted as saying.

N.C. Retail Merchants Association