For Immediate Release: August 1, 2016
Retailers once again expecting big crowds this year as parents, students and business professionals take advantage of tax free shopping
TALLAHASSEE, FL – The Florida Retail Federation (FRF), the state’s premier trade association representing retailers for over 75 years, reminds Florida families, consumers and its 270,000 retailers that the popular annual back-to-school shopping season takes place this weekend, August 5-7. This annual tax free weekend allows Sunshine State families to save on supplies and clothes to prepare their children and themselves for the upcoming year. Nationally, the average family is expected to spend $673.57 on apparel and accessories, shoes and school supplies, up from last year’s $630.36. Nationally, sales for this back-to-school shopping weekend are expected to reach $75 billion, up from $68 billion last year.
“The back-to-school sales tax holiday remains one of the most popular shopping periods of the year in Florida with students, parents and business professionals looking forward to saving money on the clothes and items they need for school or work,” said FRF President/CEO Randy Miller. “We’re excited about what the weekend will bring in terms of increased sales for businesses and the important savings for consumers.”
The holiday means big savings for shoppers and big business for retailers, which has become the second largest shopping weekend after Black Friday. As part of the holiday, shoppers don’t have to pay sales tax on back-to-school items including clothing and shoes priced at $60 or less, and school supplies less than $15 per item. For a complete listing of all eligible items, please click HERE.
This year’s back-to-school sales tax holiday allows eligible businesses to OPT OUT of participating when less than five percent (5%) of their gross sales of tangible personal property during calendar year 2015 were sales of items that would be exempt during the tax holiday period. Qualified businesses had until August 1 to notify the Department of Revenue that they were opting out and must post a notice at each business location stating their choice not to participate in the Back-to-School Sales Tax Holiday.
According to FRF’s partners at the National Retail Federation’s recent survey, families with children in grades K-12 plan to spend an average $673.57 on apparel and accessories, electronics, shoes and school supplies, up from last year’s $630.36 for a total of $27.3 billion, according to the survey. That’s an increase of 9.6 percent from last year’s $24.9 billion and compares with a total growth of 54.8 percent over the past 10 years.
The numbers follow a pattern in which spending often increases one year as families stock up on supplies only to drop off the next as they get a second year out of longer-lasting items like backpacks or computers. Spending then increases in the third year once children outgrow clothing or items need to be replaced.
According to the survey, K-12 consumers plan to spend $9.54 billion on clothing (purchased by 95 percent), $8.27 billion on electronics such as computers or calculators (57 percent), $5.12 billion on shoes (94 percent) and $4.37 billion on school supplies such as notebooks, folders, pencils, backpacks and lunchboxes (96 percent). Parents say they will spend an average $235.39 on clothing, $204.06 on electronics, $126.35 on shoes and $107.76 on school supplies.
While discount stores continue to be the choice of the largest share of shoppers at 61 percent, the number is at its lowest level in the survey’s history. But 46 percent of parents said they would shop online, a dramatic jump from last year’s 36 percent. The vast majority of online shoppers plan to take advantage of free shipping (89 percent of those surveyed) and conveniences like buy online, pick up in store (54 percent).
Bigger Kids, Bigger Bills
College students and families with children in college plan to spend an average of $888.71, according to the survey. That’s down slightly from $899.18 last year, but total spending is expected to be up at $48.5 billion compared with $43.1 billion last year due to an increase of consumers shopping for back-to-college.
The survey found college consumers plan to spend $11.54 billion on electronics (purchased by 50 percent), $7.49 billion on clothing (70 percent), $6.23 billion on dorm furnishings (43 percent), $5.78 billion on food items (69 percent), $4.26 billion on personal care items (72 percent), $3.84 billion on shoes (67 percent), $3.53 billion on school supplies (81 percent), $3.14 billion on gift cards (36 percent) and $2.7 billion on branded collegiate gear (49 percent). Spending on electronics will average $211.33, apparel and accessories $137.29, dorm furnishings $114.21, food $105.88, personal care items $78.03, shoes $70.39, school supplies $64.64, gift cards $57.54 and branded gear $49.41.
Discount stores still account for the largest share of college shopping, visited by 44 percent of consumers, but the number is at its lowest level in the survey’s history. Only 34 percent will visit a college bookstore, also a new low. Online shopping is the choice of 38 percent of shoppers, down from 39 percent last year and a peak of 45 percent two years ago.
The survey of 6,809 consumers asked about both back-to-school and back-to-college plans was conducted June 30-July 6 and has a margin of error of plus or minus 1.2 percentage points.
ABOUT THE FLORIDA RETAIL FEDERATION
The Florida Retail Federation is the statewide trade association representing retailers -- the businesses that sell directly to consumers. Florida retailers provide one out of every five jobs in the state, pay more than $49 billion in wages annually, and collect and remit more than $20 billion in sales taxes for Florida’s government each year.
ABOUT THE NATIONAL RETAIL FEDERATION
As the world's largest retail trade association and the voice of retail worldwide, the National Retail Federation's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the U.S. and more than 45 countries abroad. In the U.S., NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2010 sales of $2.4 trillion. www.nrf.com.
The Florida Retail Federation is excited about the upcoming BACK-TO-SCHOOL SALES TAX HOLIDAY taking place August 5-7 and the increased sales it bring for Florida retailers. We wanted to remind retailers of one of the changes to this year’s sales tax holiday: that eligible businesses are allowed to OPT OUT of participating when less than five percent (5%) of their gross sales of tangible personal property during calendar year 2015 were sales of items that would be exempt during the tax holiday period. Businesses with multiple locations must include the gross sales of all their Florida locations in this calculation. For businesses that were not in operation during the 2015 calendar year, this option is available when less than five percent (5%) of the business’s inventory of items for sale are items that would be tax exempt during the tax holiday.
Qualifying businesses choosing not to participate in the tax holiday must send a written notice to the Department by August 1, 2016. The notice must be on business letterhead and state that the business meets the qualifications stated above and has chosen not to participate in the tax holiday. The notice must be signed by an individual authorized to sign on behalf of the business. Businesses with multiple locations may send a single notice stating that all their Florida locations will not participate in the tax holiday.
|Mail the letter to:|| Account Management MS 1-5730 |
Sales Tax Holiday
Florida Department of Revenue
5050 W Tennessee St
Tallahassee FL 32399-0160
Qualified businesses that do not participate in the tax holiday must post a notice at each business location stating their choice not to participate in the Back-to-School Sales Tax Holiday. The notice must be posted in a conspicuous location at the place of business. The following is a suggested notice:
In accordance with Chapter 2016-220, Laws of Florida, (Name of Business) has chosen not to participate in the Back-to-School Sales Tax Holiday, August 5-7, 2016. For questions, please contact (name of contact person at business) at (contact telephone number or email address).
[Signature of Authorized Individual]
A Response to the Tax Foundation’s Special Report on Sales Tax Holidays (No. 201, July 2012)
The Tax Foundation is a Washington, D.C.-based think tank founded by a group of business executives in 1937 in response to the growth of federal spending under President Roosevelt. Its funders have included Exxon Mobil, the Koch Family Foundation, the Earhart Foundation and Citizens for a Sound Economy.
The Tax Foundation is generally critical of tax increases, high business taxes, "sin" taxes, tax preferences for the housing industry, and use of the tax code for "picking winners and losers. The Tax Foundation has attacked sales tax holiday legislation in a “special report” issued annually since at least 2006.
The report presents no original research. Many of its “findings” on sales tax holidays are presented as fact without citation or based on a misinterpretation of the literature.
1. The Tax Foundation asserts that retailers raise prices during a sales tax holiday. This conclusion is not supported by the studies they cite.
A. The 2003 Florida study on which the Foundation chiefly relies does not conclude that retailers raised prices on covered items during the holiday. Instead, it found that covered items were not as inexpensive as the authors had predicted. This “could indicate the use of less-generous markdowns by Florida retailers”, the study found, or it could mean that “the holiday was scheduled during an intrinsically high-price period.” In any event, the study concluded that at least 80% of the benefit of the holiday went to consumers rather than retailers. The researchers urged more investigation.
B. The 2009 Michigan study also relied on by the Foundation does not conclude that retailers generally raise prices during a sales tax holiday. Instead, it found that pre-tax prices on computers were lower, on the whole, during the sales tax holiday than before it, although the pre-tax price of lower-end laptops was slightly higher during the holiday than before it. The author noted that the economic model he used produced “an ambiguous prediction about the direction pre-tax prices will change. The increased competition retailers face due to greater foot-traffic in their stores during sales tax holidays serves to temper their desire to increase pre-tax prices.”
2. The Tax Foundation argues that holidays shift the timing of purchases that would have been made anyway. This conclusion is (a) overstated for items that are tax-exempt during the sales tax holiday, and (b) not supported by the studies they cite for items that remain taxable.
A. The Foundation claims that sales tax holidays “simply shift the timing of sales” rather than stimulate new sales. The 2009 Michigan study found that the timing response accounted for between 37 and 90 percent of the increase in sales of exempt computers during the holiday. This means that between 10 and 63 percent of these sales were new and not time-shifted. At any rate, it is no surprise that savvy shoppers will time their purchases (especially of major items) to periods when they know there will be no sales tax added.
B. The more important question is whether these same shoppers, when they are in the marketplace to benefit from a sales tax holiday, will purchase items that are not exempt from the sales tax. On this point the Tax Foundation cites no authority save its own assertion that any such “impulse” purchases likewise would be shifted from other time periods.
C. On the other hand, a 2007 Texas study found that shoppers viewed the holiday as an important reason to go shopping. The study cites a Wall Street Journal article in which New York University’s Stern School of Business Professor Peter Golder observes that consumers respond to sales tax holidays because they become “a social thing and community activity, something to talk about at work, with friends and family”.
D. Other economists call this the “Bandwagon Effect” of consumer demand. Whatever its called, consumers and retailers like the holiday: “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.”
E. For many retailers, the back to school sales tax holiday is one of the most important sales weekends of the year – behind only the weekend before Christmas and the day after Thanksgiving. They promote it aggressively with advertising and markdowns.
3. The Fax Foundation argues that lowering taxes will stimulate economic growth but ignores this effect in the context of sales tax holidays.
A. Economists and fiscal note writers have long debated static vs. dynamic modeling and how to quantify the effects of tax policies. Some economists calculate economic effects using an input-output methodology. Some use a time series forecast. Fiscal note writers estimate only direct impacts – they exclude secondary impacts from their estimates.
B. The Tax Foundation is a proponent of economic modeling in some contexts. In its October, 2012 analysis of Presidential candidate Mitt Romney’s tax plan the Foundation argued that “while economists disagree about the degree to which taxes affect behavior, they will all admit that zero effect is not realistic.” The Foundation then applied “an actual set of tax and economic data . . . to produce a picture of the likely effects [of the] Romney tax plan.”
C. Based on its econometric modeling, the Foundation found that that at least “60% of the “static revenue loss from Romney’s plan is recovered when the dynamic effects of economic growth are taken into account.” This result, it noted, was fully consistent with the results of the Kennedy tax cuts phased in between 1962 and 1965.
D. Neither the Foundation nor the studies it cites in its report makes any attempt to model the dynamic economic effects of sales tax holidays. All point to the static effect - taxes will not be collected on purchases that are tax exempt during the holiday – but there is no attempt to measure the indirect dynamic effects, even though a zero indirect effect is, as the Foundation argues, not realistic.
“. . .the extent to which the demand for a commodity is increased due to the fact that others are also consuming the same commodity. It represents the desire of people to purchase a commodity in order to get into ‘the swim of things’; in order to conform with the people they wish to be associated with; in order to be fashionable or stylish; or, in order to appear to be ‘one of the boys.’” H. Leibenstein, “Bandwagon, Snob, and Veblen Effects in the Theory of Consumers’ Demand,” The Quarterly Journal of Economics (May 1950), reprinted in W. Breit and H.M. Hochman, Readings in Microeconomics, Second Edition (New York: Holt, Rinehart and Winston, Inc., 1971), pp. 115-116.