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Shoppers take a break from sales tax

Mention the words “sales tax holiday” and consumers fall into a shopping frenzy. It's not as if a break on sales taxes — usually only 4% to 7% of purchases — really amounts to any great savings. But shoppers still go crazy for the deals because many retailers offer additional discounts, making it worth their while.

More and more states are getting in the game, including Georgia, where the sales tax is as high as 7% in Fulton County — where Lenox Square, the Southeast's premier mall, is located.

Developers and owners of shopping centers have witnessed the resulting boon to their bottom lines.

Georgia experienced its first sales tax holiday on March 29-30 and retailers reported it was so big they were comparing it to the weekend before Christmas. Many say sales were double or triple during the same weekend in the year-ago period. “It was wall-to-wall packed,” says Jeff Pierce, Lenox Square's marketing director.

A confluence of events during that late-March weekend sent consumers to the malls. Not only was it Easter weekend, when people were out buying their chocolate bunnies and new outfits, it was also the weekend Atlanta hosted the NCAA Final Four college basketball championship, which brought more than 50,000 fans to the metro area.

It also rained, which poured shoppers into stores as many retailers offered extra 10% to 20% discounts. Some chains that didn't qualify for exemptions, including Mori Luggage & Gifts and several furniture retailers, offered tax breaks anyhow.

“The rain helped bring people in,” Pierce says. “Saturday was stronger than Friday.”

Retailers can't wait for the next tax holidays August 2-3, which should boost back-to-school spending. Georgia's tax exemptions included up to $100 per item of clothing, up to $20 per item of school supplies and computers up to $1,500.

But tax breaks come at a price. In Georgia, the four 2002 tax-free days are expected to cost the government $11 million to $15 million in lost tax revenue. Counties throughout the state are expected to lose a total of $4 million to $7 million.

That did not discourage Georgia's legislators, and even Georgia Gov. Roy Barnes lent a hand at several retailers around the state, including a Gateway Country store in Duluth back in March.

“We know Georgia is in a recession,” says Barnes. “[The sales tax holiday] is good for the state. We want to stimulate our economy by encouraging people to shop.”

J. Craig Shearman, a National Retail Federation spokesman, says his trade organization pushed for a nationwide sales tax holiday as part of the economic stimulus package. While it did not make it in, “it stirred up a lot of interest in the topic,” he says.

Including Georgia, eight states and Washington, D.C., have adopted tax holidays. Shoppers have been known to cross borders to get the breaks on goods during the exemption periods and Shearman says more states should get on the bandwagon.

The National Retail Federation set up a toll-free phone line so people could call their Congressional leaders to urge them to support a sales tax holiday. Steve McWilliams, president of the Georgia Retail Association, adds that state retail associations also lobby congress on behalf of their members.

According to the Federation of Tax Administrators in Washington, D.C., a typical family spends around $250 on back-to-school clothes. With an average 6% sales tax exemption, a family would reap $15 in tax savings.

Still, the numbers support the holiday's popularity. Texas reported that its consumers in 1999 purchased $400 million in tax-exempt clothing, double the typical sales of an equivalent week in August. The holiday saved taxpayers, while costing the state $25.6 million in state sales taxes and $7 million in local sales taxes, the tax federation reports.

Georgia Revenue Commissioner T. Jerry Jackson says on the net side, he expects the final results for 2002 to be positive because other states that have had sales tax holidays have provided a burst of economic activity.

Shopping center owners around Georgia report their sales increases were in the double-digit range during the March tax-free period over the same time last year.

“I've had tax-free events in other states,” says Jean Guinup, a Chelsea Outlets spokeswoman. “While they've met with success, the Georgia tax holiday was more dramatic than I've seen anyplace else.” Guinup says some stores in the North Georgia Premium Outlets center posted 200% increases. She adds, “Too bad we can't have this on a monthly basis.”

Renée DeGross covers retail business and development for The Atlanta Journal-Constitution.


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