Are Tax-Free Holidays beneficial?
July 2, 2015
Find out if those tax-free holidays are right for you
Just when you thought you could relax and enjoy those lazy, crazy days of summer, you realize it’s time for your shop to begin planning for the busy Back-to-School shopping season and a possible tax-free holiday. According to RetailDIVE, consumer spending for the 2015 Back-to-School season will be higher than last year. Nearly a third of households with children ages 6 to 17 and college-age kids plan to spend more this season.
The bad news is…they’re waiting for bargains. The good news is…consignment and resale can begin promoting those bargains now!
Take advantage of your state’s tax-free holiday
Seventeen states plus Puerto Rico are offering tax-free holidays with August 7 – 9 being the most popular one by far. Alaska, Delaware, Montana, New Hampshire, and Oregon are on a “permanent tax holiday.” These five states don’t have a general sales tax at all. Massachusetts offered a tax-free weekend last year and is apparently still debating the benefits for 2015. Clothing tops the list in every state that’s offering a late summer tax break. According to the Motley Fool, households buy 49% more clothing and 45% more shoes during a tax-free holiday.
Does the good outweigh the bad?
The question is, however, do the benefits outweigh the hassles? As you can see, each state offering a tax benefit has different requirements. Some only offer the savings on particular items while others, like Missouri, offer a tax-free weekend for every purchase made, and some states add the burden of determining local taxes vs. sales taxes. The argument is made that families would have made these purchases anyway, they just chose to shop on that particular date. Plus, a tax-free holiday may require additional training for your salespeople, as well as a recalculation in your POS software. (If you happen to be a SimpleConsign user, it’s easy to set all or individual categories to “Tax Exempt” in the system.)
Many shops say the benefits have been tremendous though, even rivaling Black Friday sales. Not only have they seen an increase in sales but there’s been a boost in community goodwill as well. A tax-free holiday puts them on a level playing field with those online shops not required to charge tax. Amazon.com is even participating in those states that are normally required to pay taxes. Some states, such as Alabama, also provide marketing materials to promote the event. Before making a decision, check your state’s requirements and see what other assistance is offered to you.
Some Back to School promotional ideas
Whether good or bad, now is the time to get prepared for the biggest late summer sales event of the year. A few Back-to-School promotional ideas I gleaned from meylah.com include offering a special discount for teachers trying to build their school wardrobe; putting up a booth at a local college orientation offering dorm design ideas and even holding a college-age fashion show. “Last Chance” sales are also a good idea at this time of year. They’re a great way to clean out your summer inventory and add a sense of urgency to the shopping season.
