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Sales Tax Holiday

The 2020 Florida Legislature enacted two more sales tax holidays, a three-day “back-to-school” and a seven-day disaster preparedness tax holiday.  Although the pending threat from the COVID-19 virus lead to the Legislature eliminating nearly all the tax cuts they were considering, the popularity of sales tax holidays was affirmed once again.

From May 29-June 4, items to help Floridians prepare for hurricane season, such as flashlights, portable two-way or weatherband radios, waterproof sheeting, generators, and tie-down kits will be exempt from sales sax.  This will save Floridians an estimated $5.6 million.

From August 7-9, many back-to-school items will be exempt from sales tax, including clothing (including footwear, wallets and bags) that costs $60 or less; school supplies costing $15 or less; and the first $1,000 of the sales price of computers and related accessories for personal use. Overall, this will save shoppers an estimated $41.8 million.  

Sales tax holidays have become a popular method for reducing the burden on taxpayers. Support in the Florida Legislature (typically bipartisan) has grown for the holidays over time, to the extent that they have become standard. Since starting, these holidays have only been skipped during times of recession and budget deficit, with the last skip occurring in 2009. Although 2020 faces many budget concerns, sales tax holidays are continued to provide tax relief for Floridians and give a boost to retailers.   In 1998, the Florida Legislature passed the Florida Residents’ Tax Relief Act, which created the first sales tax holiday where clothing items priced less than $50 would be exempt from Florida’s state and local sales and use tax. Since then, there have been 26 sales tax holidays. This includes 18 for back-to-school shopping, varying in length from three to 10 days, sometimes with different exempt items and price limits. There have been six disaster preparedness holidays and two for energy-efficient appliances.

In addition to giving back to taxpayers, holidays also have the potential for positive impacts on employment, income, and tax revenues. When consumers buy clothing, direct effects impact the retail and apparel industries. 

The impact of increasing discretionary spending in the Sunshine State is large, as the retail industry is extraordinarily important to Florida’s economy. Florida’s 274,000 retailers employ 2.7 million people, providing one out of every five jobs in the state, pay $49 billion in annual wages, and contribute $155 billion in gross domestic product.[1] A study of the August 2010 Florida Back to School Sales Tax Holiday by the Washington Economics Group (WEG) found that the holiday resulted in increased sales in Florida. The study compared sales from 2009, when there was no holiday, to 2010, when the holiday was reinstated and found that gross sales increased by 3.8 percent from August 2009 to August 2010 and that $293 million of that increase was attributable to the sales tax holiday.[2] Furthermore, due to the intense competition in the retail sector, many stores advertise special discounts during the holiday, increasing the benefit to consumers.

Florida’s sales tax holidays have become more than just a tax break. They are a traditional back-to-school event that neighbors talk about and businesses promote. There is likely no other tax break that generates such excitement among taxpayers while stimulating business activity with increased advertising and competition. The Florida Retail Federation reports that the Back to School Sales Tax Holiday has become the second largest shopping weekend after Black Friday. [3]

Disaster preparedness holidays also encourage Floridians to stock up of items they need during an emergency, before there is a run on the stores and shoppers find empty shelves.

Due to varying local option taxes, sales taxes in Florida are not uniform. Sales tax holidays are the one time during the year that all Floridians pay the same tax rate (0 percent) on covered items. It also briefly removes the competitive tax advantage many on-line retailers have over Florida’s brick and mortar retailers, since many remote sellers do not have to collect tax on Florida sales.[4] In Florida, most businesses support the tax holidays, evidenced by the strong support of the Florida Retail Federation, the Florida Chamber of Commerce, Associated Industries of Florida, and the National Federation of Independent Business-Florida (NFIB). Tax holidays are popular with residents, important for the state’s retailers and beneficial to the state. Whenever feasible, the Legislature should continue to offer Sales Tax Holidays as they are a visible, tangible way of giving money back to taxpayers.

 

[1] Florida Retail Federation, 2018-19   Impact Report

[2] Washington Economics Group, “Economic Impact Analysis of the 2010 Back to School Sales Tax Holiday.” February 9, 2011

[3] Florida Retail Federation, Press Release, “Back-to-School Sales Tax Holiday Shopping Weekend Kicks Off this Friday,” August 1, 2016

[4] Florida TaxWatch has done considerable research on this issue. For a summary, see http://www.floridataxwatch.org/resources/ pdf/EFairnessPiece.pdf

Author: Kirby Allen

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