Salem, Mass. (June 23, 2004) -- Massachusetts will join the growing list of states across the country offering sales tax holidays in an effort to boost consumer spending.

On Aug. 14, Massachusetts will become the tenth state to offer a sales tax holiday, which will exempt consumers for the day from the state’s standard 5 percent sales tax.

“Since its first introduction in 1997, sales tax holidays have spread rapidly, because many state politicians have recognized this method of boosting consumer spending and the trend will increase,” says Jon Abolins, vice president of tax and government affairs for Taxware, a sales tax software company.

In addition to Massachusetts, sales tax holidays will be held throughout the summer in Connecticut, Florida, Georgia, North Carolina, South Carolina, Texas, West Virginia, Missouri, Iowa and possibly New York.

While the concept seems simple enough, scenarios like refunds, exchanges, coupons, lay-aways, Internet purchases and use tax payments can create confusion for everyone involved. “For retailer’s tax departments, sales tax holidays create headaches, and trying to apply the law to actual operations can be difficult and requires complex changes to their registers and business processes,” says Abolins.

TaxWare offers these tips to make the process smooth:

  • Get involved early. Legislatures often outline the general concept of how they want the sales tax holiday to operate, leaving their Department of Revenue to fill in the details. The DOR will often respond to this assignment by issuing proposed regulations and then allowing the public to make comments. This “notice and comment” procedure gives merchants a unique opportunity to influence how the holiday will be administered in their state.
  • Provide employees with direction. A tax department needs to start thinking about an upcoming holiday as early as possible, read everything the DOR publishes regarding its implementation, and then provide written direction, to personnel. “Remember, we are not talking only about educating the people who run the checkout counter, but also your lay-away department, customer service personnel, and the returns desk,” adds Abolins.
  • Identify what qualifies. Consider developing a checklist of the items you carry that do and do not qualify for holiday treatment. If possible, mark tax-free items with an easily identifiable tag. The simpler the process, the less chance for mistakes.
  • Cover your bases. Execute a certificate certifying that purchases are for non-business use. Have plenty of copies of the certificate on hand in each of your retail locations and consider posting a copy of the certificate on your company Web site. These certificates are for your protection in a subsequent audit and should be executed whenever required.
  • Check your registers. Date and time accuracy is critically important in a sales tax holiday. If the DOR questions your failure to charge sales tax on a certain item, it will be your burden to prove that the item was sold on the holiday.

-- Carly Lombardo-Bohach

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