Sales Tax Holidays - What a great break!

Several years ago, I started tracking these holidays and doing an annual column on them for MarketWatch.com. They sound like a wonderful break for taxpayers, especially when it comes to buying all those back-to-school supplies, don't they?

Here's the current list:
http://www.vertexinc.com/ResourceCenter/articles/2009/August/retail.asp

Let's see how great this really is, beyond the hype. OK?

How much money can the typical household really save on those before school purchases?
If they spend $500 per year, at a sales tax rate of 8%, that saves them $40 per year.
For a family where cash is really tight, that can mean being able to pay the monthly utility bill without scrounging for funds.

For everyone else, it's insignificant. The way people spend money on impulse purchases and designer sneakers, $40 savings in a whole year isn't much.

Of course, if you add in the purchase of a computer for $1,000 - that could bring the sales tax savings up to $120.00. Now we're talking. (Or look at Missouri, where they will allow up to $3500 for computers. Their sales taxes range from just under 5% to nearly 7.5% depending on the county.)

Then you add in the savings some states offer on going 'green', with sales taxes waived on energy-savings installations of up to $1500 - that could add another $120 to the savings.

As a consumer, working your way through the maze of tax holidays offered by your state, you could save an overall average of $10-$25 per month. As long as you spend over $300 per month to achieve that savings.

What about tax professionals and retailers - how do these holidays affect us?

For retailers, this is a huge burden. It involves re-programming their entire point of sale system to change the sales tax rate on several (or several hundred, or thousand) affected items. And then programming the system back at the end of the sales tax holiday. It means making these changes separately for stores in different counties, or even perhaps different cities! It means having extra staff people on hand to audit the system to make sure there were no major errors in over/undercharges. And the looming threat of a state sales tax audit to see if they handled the sales tax charges correctly.

For tax professionals, working with our active retail clients, it means a great deal of extra review of sales figures for a weekend's or a week or two's transactions, once or twice a year. Extra reconciliations to make sure your client isn't penalized for over/undercharging sales taxes. It means at the end of the year, you can't just multiply the tax rate by total sales as a math check to see if total sales tax expenses are close to what they should be.

When I first started writing the articles, I spoke with retailers and tax professionals - they hated the process.

If the process is so onerous, is it really worth going through? Do these promotions really increase sales, over the sales that would have been made without the sales tax holidays? The retailers tell me they don't significantly increase their sales.

Perhaps it's a boon for Energy Star-type sales in those few states that have those tax holidays? I don't know. But, coupled with IRS and/or state tax credits, the savings might be significant in that product range.

Are you in a state with sales tax holidays? We'd love some feedback from you about how effective they are vs. the costs involved. And of course, does dealing with extra work earn you a lot of extra money?

Thanks for your feedback!

This blog

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

43676

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

76171

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

48638

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

89357
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
20745

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

55862

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

80894

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

25077

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

64340

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

34535
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
102993
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
26067

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

52783
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
27965
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
32282

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

100770

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

33449

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

111776

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

61272

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

39274
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
66638

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

92680

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

53716