Why I'm Not a Fan of Sales Tax Holidays

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The Georgia Department of Revenue reminds us that the annual Sales Tax holiday is coming up again, July 30-August 2.

It's been a number of years that Georgia and a bunch of other states have jumped on the Sales Tax holiday bandwagon and I've never been a much of a fan.

Want to know why?  

First, for consumers, the concept is a little bit deceptive. The ads tout big savings on items you buy during the holiday. However, if you think about it, the savings are minimal. Consider that purchasing $100 worth of exempt merchandise saves you only $7 in most of Georgia's counties. Whoopee.

I ventured out last year during the holiday and was frustrated at the crowds and the mess. Frankly, I'd rather give the state my $7 and let them hash it out.

Don't get me wrong, the savings on an eligible computer system (up to $1,500) would save you $105 in Sales Tax. That's worth it. Although you could order a computer online and still qualify for the sales tax holiday without having to fight the crowds.

There are also some quirky "gotchas". For example, according to the Dept of Revenue's FAQ page, if you go online and buy a pair of pants that costs $95, but shipping costs an additional $10, you'd have to pay tax on $105. The pants are no longer eligible because the TOTAL of the item plus shipping exceeds the $100 threshold. On the other hand, if you drive over to the mall and purchase the pants for $95, then the pair of pants is an eligible purchase. You'd probably be using ten dollars worth of gas to get there and back, while polluting Georgia's air. Like I said, "Quirky."

Next, the holiday makes bookkeeping difficult for some of my clients. Most of my clients aren't affected because they either don't sell any eligible products, or they are not in the retail business to begin with. For those who are, tracking eligible products versus non-exempt products and trying to reprogram their point of sale system means an additional couple hours of work on their part and a couple hours of extra work on my part to get their sales tax return completed.

Finally, the impact to the state budget, while not enormous, is, at the very least, significant. It's hard to find an exact total, and those that you can find, don't seem to agree. But, it appears that the annual impact to state and local governments in Georgia is in a neighborhood just north of $3.5 Million. This is money that has to be replaced in some way, despite the sharp decline in state revenues and massive cuts in operations statewide.

In a future article, I'll suggest ways to make this revenue up - not by increasing taxes elsewhere, but by eliminating some wasteful State programs. Somebody remind me to tell you about the "Umbrella Guys".  OK?

For more information on the Georgia sales tax holiday, and for lists of eligible items, click here:

http://budurl.com/8rqw

Here's a link to a table showing all the states currently offering Sales Tax Holidays:

http://budurl.com/gbfy (Courtesy of Federation of Tax Administrators)

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