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Ohio legislators, retailers await 1st sales tax holiday

TNS Regional News • Aug 3, 2015 at 7:07 PM

It’s considered an experiment.

Beginning Friday through next Sunday, shoppers will not pay state and local sales tax on clothing items worth up to $75 each and school supplies worth up to $20. In Lucas County that translates into a total break at the cash register of 7.25 percent — 5.75 percent in state tax and 1.5 percent in local piggyback tax — on top of any of the store’s own back-to-school promotions.

For example, a shopper in Toledo buying $300 in approved clothing and supplies would save $21.75.

“We are treating this weekend as we would a weekend during the holidays, kind of like Black Friday,” said Julie Sanderson, senior marketing director for Franklin Park Mall. “This is Ohio’s first, so we’re learning from the chamber of commerce and our retailers who have stores in states that do this on a regular basis. There is no special event. The no-tax is the special event.”

Long sought by retailers in the face of governmental resistance until late last year, this one-time sales-tax holiday has been billed as a pilot project.

“It shows good will, that state government is doing things to help you as a consumer with the costs of getting ready for school,” Ohio Tax Commissioner Joe Testa said.

Limitations

The tax break will apply regardless of whether the purchase is made at bricks-and-mortar stores, online, by mail, or by buying in another state and declaring the purchase on next year’s income tax return.

But don’t expect to take advantage of the holiday to buy a laptop for junior’s studies. The law, sponsored by state Sen. Kevin Bacon (R., Columbus) tightly defines what is eligible, and computers, purses, and hockey sticks didn’t make the cut, even if they’re used for school-related activities.

The break cannot be used on purchases of business uniforms or sports equipment, and the law establishing the holiday specifically states what qualifies as a school supply or instructional item.

Brian Dicken, vice president of public affairs at the Toledo Regional Chamber of Commerce, said the chamber and merchants have been preparing for next weekend for months. Because of the limitations on the items eligible, retailers may have had to reprogram scanners.

“When you talk about school supplies, people assume you’re talking about the Office Depots,” he said. “But what about Kroger? They sell a lot of school supplies. What’s the impact that they’re going to have?

“Being that it’s the first one, that’s why we started so early in working with them, so they could be prepared,” Mr. Dicken said.

A headache

Bruce Carroll, owner of Cleveland-based Schoolbelles, said the sales-tax holiday has been a headache. The chain, which has five stores in Ohio, including one at Westgate Towne Center in Toledo, sells school uniforms and accessories.

“I’ve noticed that our customers are waiting to do their shopping on those days, which will really wreak havoc on availability and lead to a surge in customers who will be waiting,” he said. “A lot of customers would already have ordered from me, which gives me more time to spread this business and procure these items.

“It will be a strain on the customer,” he said. “It will be like Christmas Eve when you’re waiting in line.”

Mr. Carroll would prefer that Ohio not impose a sales tax on clothing at any time, but, absent that, a sales tax holiday a bit earlier in the summer would be helpful, he said.

Over the years, bills have been introduced that would have waived the tax not only on clothing and routine school supplies but also on higher-end computer equipment.

Those efforts proved unsuccessful, particularly since lawmakers and Gov. John Kasich had been moving in the opposite direction, raising the sales tax rate by a quarter of a cent in 2013 to 5.75 percent and slightly expanding the base on which the tax is applied.

As recently as this year, Mr. Kasich unsuccessfully proposed raising the state sales tax to 6.25 percent as part of a shift away from taxing income toward taxing consumption.

Assessing the effects

The state’s experience with its first sales tax holiday might be evidence considered by a newly created legislative committee that must study the state’s tax structure and report back to the General Assembly. The Ohio Legislative Service Commission estimates that the three-day sales tax break will cost the state about $13.5 million.

Local governments and libraries could lose a total of $3.2 million from their local piggyback taxes.

It’s also unclear whether the break will lead to greater sales, much to retailers’ delight, or, as Mr. Carroll fears, to simply changed patterns as shoppers shift purchases they already planned to make to the three-day holiday.

“We will track the activity that we get on the sales-tax returns and do a comparative look at the months before and after to see if there’s movement compared to prior years,” Mr. Testa said. “We’ll provide legislators with what we see so they can make a decision if they want to repeat it. Another thought is we’ll hear anecdotally from the retailers themselves about their own traffic.”

But he said the benefits of such a holiday go beyond just the dollars and cents of it.

“It’s a good message, sort of like the $5 billion total tax savings the governor talks about,” Mr. Testa said. “It’s not just the dollars themselves. It’s also the message that the governor and state and government are trying to lessen your burden.”

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By Jim Provance - The Blade, Toledo, Ohio (TNS)

©2015 The Blade (Toledo, Ohio)

Visit The Blade (Toledo, Ohio) at www.toledoblade.com

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