BOSTON — Shoppers will get a reprieve from the state's sales tax this weekend, with the annual two-day tax holiday giving them a break on some purchases less than $2,500.
The respite from the 6.25 percent levy, on Aug. 17 and 18, is mandated by the "grand bargain" agreement signed last year by Gov. Charlie Baker. The deal made the annual tax holiday permanent in exchange for business leaders agreeing to an increase of the state's minimum and sub-minimum wages, a paid leave program, and other concessions.
Retailers view tax holidays as an opportunity to lure shoppers during a slow season and level the playing ground with online retailers, many of whom avoid paying the state's sales tax.
"It’s good for retailers and Main Street merchants, but it’s also good for consumers and the economy," said Jon Hurst, president of the Massachusetts Retailers Association.
The holiday is particularly important for communities along the New Hampshire border that compete year-round with stores in the tax-free Granite State.
Many consumers use the weekend to stock up on school supplies or more expensive goods.
Christopher Carlozzi, Massachusetts state director of the National Federation of Independent Businesses, said the extra business will particularly benefit struggling Main Street merchants including those affected by the Merrimack Valley gas disaster.
"The sales tax holiday weekend is an excellent opportunity to support the small businesses that support our communities every year," he said. "By shopping at businesses on Main Street, consumers are supporting their local communities and bolstering local entrepreneurs while saving tax dollars and taking advantage of additional promotions."
But the holiday comes at a cost. The Department of Revenue estimated Massachusetts forfeited more than $30 million in revenue over the sales-tax holiday weekend last year.
Retailers suggest that sales before and after the tax-free weekend will help the state recoup some of the tax revenue it will lose.
Tax watchdogs are skeptical of the impact of tax-free holidays, with some arguing that the policy subsidizes businesses at the expense of limited state funding for other programs.
To be sure, not everything will be tax-free. The holiday won't include big-ticket items, such as cars and boats, or single items costing more than $2,500. Nor would it include taxes on energy bills, restaurant meals, tobacco or marijuana products.
There’s no state sales tax on groceries or clothing costing less than $175.
Retailers say Massachusetts' sales tax puts them at a competitive disadvantage. It has the third-highest sales tax in New England, behind Rhode Island's 7 percent and Connecticut's 6.35 percent.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at firstname.lastname@example.org.