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Politics

Sales Tax Holiday in House-Senate Negotiations

April 14, 2013 - 6:00pm

With lawmakers preparing to work out differences between two competing visions for how to spend taxpayers' money this coming year, they also still have to decide on whether to give shoppers a back-to-school sales tax break, and if so, how to do it.

There's broad support for the sales tax holiday -- it's highly popular with Florida residents, and, depending on how you look it, it may not actually cost the state in lost revenue.

And obviously, retailers love it.

A bill (SB 406) passed unanimously on Friday by the House includes a partial break from the sales tax from Aug. 2 through Aug. 4 of 2013. It would cover clothes, wallets and bags, handbags and backpacks, shoes and some other items up to $75, and school supplies up to $15, as well as some personal computers.

The House will work out differences with a Senate version of the bill in a conference committee.

There is interest in the Senate in having a sales tax holiday this year. It's part of a bill (SB 916) that was approved unanimously last month in the Education Committee and is scheduled for a hearing this coming Wednesday in the Finance and Tax Subcommittee.

But the issue is also part of negotiations over broader tax policy.

The same Senate Finance and Tax panel earlier this week advanced a bill that seeks to raise new revenue through additional tax collections on online sales of merchandise sold by companies like Amazon. Backers of the idea, however, want to offset the new money by lowering other taxes, including, possibly, an August sales tax break, along with a lowering of the communications services tax. But the amount of any offset would be dependent on how much is actually raised through taxing online sales.

The effect on tax collections from the tax holiday is interesting. State economists estimate a three-day sales tax holiday at the purchase amounts being contemplated by lawmakers would reduce sales tax collections by at least $24 million, and cost local governments more than $5 million in local add-on tax collections. That doesn't include computers, which would increase the number.

However, economists have also noted that overall sales tax collections actually go up when the state holds a sales tax holiday.

Here's how that works: someone buys a $10 item that's covered by the tax holiday, and the state calculates it loses out on 60 cents in taxes that otherwise would have been collected. But, lots of stores typically run sales at the same time and promote the sales tax holiday, increasing purchases. So the same person sees a sale item that's not covered by the tax holiday and spends $20 on that item. They then pay $1.20 in taxes they otherwise wouldn't have -- so the state comes out a net winner.

A recent study by the Washington Economics Group said the "tax cut" in 2010, for example, actually increased state sales tax collections by $7 million net.

That, some would argue, makes the holiday a tax break that could raise more revenue than it costs, making it a particularly popular tax-cutting option for lawmakers.

Florida has held the sales tax holiday a number of times since a weeklong version first occurred in 1998. Most times, it has come at back-to-school time and focused on clothing and other items needed by school kids. In 2007 it also included energy efficient products and hurricane preparedness items.

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