Justine Griffin/Sarasota Herald-Tribune—Following a relatively flat year for the retail industry and tepid back-to-school sales last August, Gov. Rick Scott’s proposal for an extended sales tax holiday in 2014 came as good news for retailers in Florida.
The governor announced plans for a 10-day sales tax holiday as a part of his “It’s Your Money Tax Cut Budget” last week. If approved by lawmakers this spring, the 10-day period in late summer would be the longest sales-tax holiday in state history, edging past a nine-day tax free period in 2007.
The extended period would serve as a much-needed boost for retailers halfway through the year, analysts say. Incentives like tax-free holidays allow chain stores to offer marked down prices on non-tax exempt merchandise, too.
The tradeoff would be an estimated $60 million loss in state revenue.
Bradenton-based Bealls department and outlet stores expect to see double-digit growth during the back-to-school sales period this year, according to Bill Webster, spokesman for the company.
“We always see a considerable increase during the tax-free times, and a lot of sales come from departments that are not tax free,” Webster said. “It’s a boost to the consumer. Three days is just not enough. The longer tax-free periods allow consumers to take more advantage.”
The three-day tax-free period in 2010 generated $115 million more in taxable sales in Florida, according to a study by the Washington Economics Group, which examined the impact of back-to-school sales in the state.
That economic boost led to higher payrolls in the retail industry and a boost in staff during the tax holiday, said Rick McAllister, president and CEO of the Florida Retail Federation.
Retailers see an average increase of 30 percent to 40 percent in store traffic during the sale-tax holiday.
“Retailers traditionally compete with sales and markdowns to attract shoppers during the tax holiday, and we see an increase in sales because of it,” McAllister said. “It gives many families whose paychecks come on two-week cycles another chance to take advantage of the sales that retailers offer.”
Back-to-school spending is the second-largest retail season of the year, following the year-end holidays, according to the National Retail Federation. In 2013, consumers nationally spent $75.2 billion on notebooks, binders, pencils and other school items for children in grade school through college. But the percentage of consumers shopping for back-to-school was 33 percent lower than in 2012.
Families with school-age children spent an average of $634.78 on clothing, shoes, supplies and electronics last year, down from the $688.62 average in 2012.
“It’s important to do whatever it takes to generate retail sales after a year like last year,” said Jeff Green, a Phoenix-based retail analyst with Jeff Green Partners. “There is this fear this year that retail sales won’t be that strong in 2014, so an extended tax-free period is a good move for retailers.”
State lawmakers are almost certain to approve another sales tax holiday this year. But there is less clarity over the length of the holiday, especially given the competing ideas for tax breaks proposed by lawmakers for consideration in the 60-day legislative session beginning in March.
The problem is the longer the tax-free period, the larger the hit on the state budget. State economists estimated that the 2013 three-day holiday resulted in a loss of $34.7 million in sales tax revenue.
Lawmakers in the Republican-led Legislature expect to have a surplus in revenue collections this year, and they have proposed a variety of tax cuts, from reductions in levies on businesses, communications and auto registration fees.
“We’re looking for ways to put money back in people’s pockets,” state Sen. Nancy Detert, R-Venice, chairwoman of the Senate Commerce and Tourism Committee.
Since the tax holiday was revived after the recession years, lawmakers have only approved three-day holidays over the last four years. The tax-free break began as a seven-day holiday in 1998.
The sales tax holiday allows Florida shoppers to buy clothing and school supplies and not pay state or local sales tax on specific dates, usually before the school season starts in late August.
The aggressive growth of the online retail sector has hurt chain store sales in recent years and will continue to affect brick & mortar stores in 2014, Green said. But an added incentive, like a tax free period, will draw more people to stores come the end of summer.
Florida followed more than a half-dozen other states last year and exempted low-cost computer sales for the first time last year.