Should Small Business Saturday Be a Tax Holiday?


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Small Business Saturday® (SBS), which is the first Saturday after Thanksgiving, was established by American Express OPEN in 2010 as a way to help small businesses get customers, which stimulates sales on Main Street.

The NFIB has included in its legislative agenda for 2015 the goal of making Small Business Saturday a sales tax holiday (here’s the agenda for my state of Florida).

About sales tax holidays

A sales tax holiday is a temporary suspension of the requirement to charge sales taxes that would otherwise be due on specific goods and services. The idea of a sales tax holiday is relatively new, with the first holiday created in New York for the first week in January 1997.

Today, only a little more than a dozen states offer some form of tax holiday. The holiday usually runs for a weekend or so.  Some states run their holidays each year (e.g., early August for back-to-school clothing and school supplies); others do so from time to time (Florida had a pre-hurricane season sales tax holiday last year and waived sales tax on items such as flashlights, first aid kits, and portable generators).

Find a list of sales tax holidays for 2015 from the Federation of Tax Administrators and the Sales Tax Institute. The latter list includes annual sales, so even if 2015 days aren’t published yet, you can plan your marketing efforts nonetheless.

Wisdom of a tax holiday for SBS

Last year, the Tax Foundation concluded that tax holidays are politically expedient but poor tax policy. The Tax Foundation found:

  • Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases. Some retailers raise prices during the holiday, reducing consumer savings.
  • Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management. However, free advertising for what is effectively a paltry 4 to 7 percent sale leads many larger businesses to lobby for the holidays.

Nonetheless, many small retailers like the notion of a sales tax holiday because of the free advertising. Will this boost overall sales or simply change the time at which revenue is received (see the Tax Foundation’s conclusion noted above).

Final thought

With or without any sales tax holiday, Small Business Saturday has been very helpful to some local retailers and restauranteurs; it should continue to grow each year. Mark your calendar: November 28 for SBS 2015!


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