Opinions mixed on sales tax holiday

The state has held a sales tax holiday for three days each August since 2004, according to David Griffith, public information officer for the Missouri Department of Revenue.

Griffith said the timing of the annual event – usually the first weekend in August – is not a coincidence. The holiday is intended to offer a break to families purchasing back-to-school supplies; sales tax is waived only on clothing, school supplies and computer equipment within certain monetary limits.

“It’s estimated nationally that an individual family will spend $657 per child in back-to-school goods,” Griffith said. “If you look at saving 7 (percent) or 8 percent in sales tax … that’s a significant amount of money.”

Griffith added that the holiday also benefits individual retailers, who can tout state-sales-tax-free shopping to bring in additional customers.

“With the economy being what it is, the more they can bring people to the front door, the better,” he said.

Griffith said the state doesn’t track how much the state’s retailers sell during those days or how much potential sales tax revenue is lost, making it difficult to quantify the impact of sales tax holidays.

Local savings

Tax-holiday shoppers can save more than just state sales tax, though. During state tax holidays, municipalities also can choose to waive their local sales taxes on approved purchases. Some cities, however, opt out; shoppers in those localities will save state sales taxes, but they have to pay local sales taxes.

Many cities, including Republic, take advantage of the tax holidays as a chance to draw in new customers. Republic was among the Missouri cities to waive local sales taxes in conjunction with the back-to-school tax holiday this year.

Pete Harris, finance director for the city of Republic, said the advantages for his city outweigh the potential loss of tax revenue, which he estimates at no more than $9,000 each year.

“The people who want to come here get a little bit of a break, but at the same time, they see shops they haven’t seen before, and maybe they’ll come back,” Harris said. “If they come here to Wal-Mart to buy school supplies, they’ll probably buy other things, too, and they very well could eat while they’re in town or buy gas before they leave.”

Harris plans to recommend that Republic participate in the upcoming green tax holiday April 19–25. After approval by the legislature, Blunt signed the bill in July, creating the green tax holiday, which waives state sales tax on Energy Star appliances up to $1,500.

Hanging onto revenue

During the August sales-tax holiday, 170 cities and 52 counties charged their regular municipal sales tax on back-to-school purchases.

Springfield City Council passed a resolution in 2007 permanently opting out of the sales-tax holiday. Finance Director Mary Mannix Decker said the city doesn’t think there’s much benefit to participating in the back-to-school holiday, though she noted that council hasn’t yet decided whether Springfield will participate in the green tax holiday in April.

“The sales tax holiday may change a person’s timing to purchase something, but it doesn’t necessarily add incentive for them to purchase something that they weren’t planning on buying,” Decker said.

The bigger reason for not participating, however, is the city’s dependence on sales taxes. More than 35 percent of the city’s total income comes from sales tax revenue.

October, when sales tax revenue from August purchases would come into city coffers, is also one of the city’s bigger sales tax months – the city received nearly $3.2 million in October 2007. “We don’t feel that we have room in our budget to forego that revenue,” Decker said. “I don’t think the city’s sales tax, the small percentage that it is, is a big enough incentive (for people to buy). We still have to fund city services whether the revenue is there or not.”

Despite the potential financial difficulty, Republic’s Harris thinks the holiday is a benefit for his city and its residents.

“Do we lose sales tax revenue? Yes, but there’s an ancillary effect that makes it so we come out all right,” Harris said.

Opting Out

Though Missouri waives its sales tax statewide during tax holidays, individual municipalities can choose whether to waive local sales taxes at the same time. Among the 170 cities that opted out of the 2008 Missouri sales tax holiday in August:

Ash Grove

Battlefield

Bolivar

Branson

Everton

Fair Grove

Hollister

Marshfield

Mount Vernon

Nixa

Osage Beach

Ozark

Purdy

Reeds Spring

Rockaway Beach

Springfield

Stockton

Walnut Grove

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