August 07, 2006
The Tax-Free Shopping Extravaganza: Who Benefits?
Posted by Christine Hurt

I've been noticing news accounts that 13 states and D.C. are holding sales tax-free periods during the back-to-school season.  I wonder if anyone has done any research into how these weekends affect consumer behavior.  I went shopping during the first tax-free weekend in Texas seven years ago, and I have to say that I was very disappointed and have never made a point of shopping during that time again.  As someone said to me, "I'm going to rush out for an 8% sale?"

I found that at the stores that I freqented at the time, Old Navy and Gap, no sales were offered during the tax holiday.  These stores always have sales and special buys, but not during the tax holiday.  I suspected that stores felt no pressure to recruit customers during this time as the stores were crowded with the tax-free shoppers.  The next week, when the tax holiday was over, the same items were 20-30% off.  Are tax-free weekends mere subsidies for retailers and not really breaks for consumers?  I suppose there are some items that don't go on sale in August -- school uniforms? -- and maybe the 8% discount comes in handy.  However, I suspect that instead of being a boon to the consumer, the state expenditure merely allows stores to charge more.  If readers know of any studies, I would be very interested to see them. 

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