Retailers Ask Obama for Sales Tax Holidays

The National Retail Federation has asked President-elect Barack Obama to include a series of sales tax holidays within the economic stimulus legislation he is drafting with Congress.

Retail sales are expected to hit dismal lows this holiday shopping season, falling prey to not only the economic crisis, but also bad weather across large regions of the country. Many retailers are going out of business or seeking Chapter 11 bankruptcy protection this year. The retail industry is just the latest industry seeking relief from Washington.

The NRF proposed that tax holidays be held during March, July and October 2009, each lasting 10 days, including two weekends. Tax-free treatment would apply to all tangible goods subject to a state sales tax, ranging from apparel and home furnishings to restaurant dining and automobiles but would exclude tobacco and alcohol.

The federal government would reimburse the 45 states that have sales taxes for the lost revenue, and would provide the five states without a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon) with revenue approximating the sales tax reimbursement that would be received by states with a similar population size.

"We urge you to act quickly on legislation to help stimulate consumer spending as one of the first priorities of your new administration," the NRF wrote in a letter to Obama. "To be effective, any fiscal stimulus package must be enacted with great speed. It must be substantial. And it must be sustained. To accomplish this, the plan must include a longer-term investment designed to produce sustained economic growth through job creation as well as short-term economic stimulus aimed at increasing consumer spending."

State sales tax rates range from 2.9 to 7.25 percent, and add $236 billion a year to the amount that U.S. consumers pay for goods and services, according to the U.S. Census Bureau. By temporarily lifting the sales tax for the three 10-day periods, the NRF estimates that consumers could save nearly $20 billion. Based on the 112.4 million households in the United States, the figure would amount to almost $175 for the average family.

An NRF survey conducted when a national sales tax holiday was considered in 2001 found that 82 percent of consumers favored a tax holiday, 83 percent would take advantage of the holiday by making purchases, and 69 percent would make purchases they otherwise would not have made.

The NRF also called for infrastructure investment in roads, rails, ports, public schools and renewable energy projects, saying it would have a double benefit of creating jobs and repairing systems that are critical to commerce.