Bay Staters will have to wait a bit longer for that tax-free shopping spree — unless they’re willing to drive to New Hampshire.
Gov. Charlie Baker announced Tuesday that the 2020 sales tax holiday in Massachusetts will take place on Aug. 29-30, an “especially important” weekend this year as many local businesses have been ravaged by the effects of the COVID-19 pandemic.
Baker made the two-day break from the state’s 6.25 percent sales tax — which had been held most, but not all, years since 2004 — a permanent annual fixture as part of a law signed in 2018.
While derided by tax experts as an inefficient political gimmick, the Republican governor is hoping the sales tax holiday will help local businesses recover this summer in the wake of shutdown orders and decreased consumer spending due to the coronavirus.
“This break from the sales tax has always been an important way for the Commonwealth to support many small businesses and consumers, but it’s obviously especially important this year given the fact that so many of those businesses have just recently reopened,” Baker said during a press conference Tuesday.
Set for the Saturday and Sunday prior to Labor Day weekend, this year’s sales tax holiday is markedly later compared to past editions, which have traditionally been held in mid-August.
Baker did not say why the decision was made to designate the weekend roughly two weeks later than usual; his office pointed to a state law that says the holiday must be held in August on days that “maximize the economic benefit to the commonwealth.”
It’s also unclear what the retail scene will look like come late August, given the unfolding pandemic. Massachusetts is currently in the second step of Phase 2 of the state’s four-phase reopening plan, which allows stores and malls to open under capacity limits and other safety restrictions.
Phase 3, which will potentially ease certain restrictions on retailers, could begin as soon as early July. Baker has stressed that it will depend on whether the rate of COVID-19 cases, hospitalizations, and deaths in Massachusetts continue to decline.
In any case, there’s still a lot of uncertainty. But here’s what we do know about the 2020 sales tax holiday.
When is the holiday?
Aug. 29 to 30.
That includes purchases made online on those days during Eastern Daylight Time, even if they aren’t immediately picked up or delivered. Baker’s administration has encouraged customers to take advantage of curbside pickup or delivery options, as opposed to in-store shopping, due to the elevated risk indoors of catching or spreading COVID-19.
The sales tax holiday does not apply to layaway sales, in which a customer initially pays only part of the total cost of an item.
Customers can use the holiday for rentals of up to 30 days — as long as the rental is paid in full during the holiday weekend and does not fall into one of the ineligible categories (more on that below). However, they are not allowed to cancel and rebook previously made purchases for the holiday to avoid the sales tax, both for rentals and all other eligible items.
What are the limits?
There are both quantitative and qualitative exceptions to the sales tax holiday.
First, any single item that costs more than $2,500 remains subject to the sales tax. Customers can still buy several items in single transactions that, in total, add up to more than $2,500; such a shopping spree wouldn’t get hit with the sales tax.
However, if a customer spends more than $2,500 on any single item —whether it be a big new TV or major kitchen appliance — the entire price is subject to the 6.25 percent tax.
One complication to this rule is clothing, which is normally tax-free up to $175. For clothing purchases that are more than $2,500, the first $175 remains tax-free. But the rest would be subject to the sales tax. In other words, $2,825 of a $3,000 wedding dress would be taxed. But a $2,499 wedding dress would be completely tax-free.
There are also a number of things that, regardless of the price, remain subject to the sales tax:
- Motor vehicles
- Telecommunications services
- Tobacco products
- Marijuana or marijuana products
- Alcoholic beverages
Purchases made by businesses — or for business purposes — also remain subject to the sales tax.
What about after the sales tax holiday?
According to state officials, items bought during the holiday weekend that are later returned or exchanged remain exempt from the sales tax.
If a customer finds that a businesses wrongfully charged them the sales tax over the weekend, officials say they should be able to get a refund from the company with their receipt or proof of purchase
“If you were charged tax in error, the business that you bought your item from is responsible for giving you a refund of the tax you paid,” says the state’s website.