Price Effects around a Sales Tax Holiday: An Exploratory Study

Abstract

Tax relief from a sales tax holiday depends on lower final prices for the eligible goods. In this article, prices are compared for ten goods across several retail locations before, during, and after the 2001 Florida sales tax holiday period. The comparison is also extended to the same items in a metropolitan statistical area just outside of Florida. The exploratory data indicate that before‐tax prices are slightly higher in Florida retail establishments during the sales tax holiday, but it is not clear whether these prices reflect less generous markdowns by Florida managers or pricing decisions for much larger regions. Whichever the case, the tax policy forces consumers to speculate on non‐holiday prices and choose items where the final price is, in fact, lower during the holiday.

Lights, Camera, but No Action? Tax and Economic Development Lessons From State Motion Picture Incentive Programs

“…Sales tax waivers may also be insufficient to incentivize significant capital purchasing; there's little need to buy new equipment just to take advantage of not paying a sales tax, especially if a production company can transport already purchased equipment from another location. Moreover, merchants may increase prices on goods when tax waivers are in place, offsetting the tax benefit (Harper, Hawkins, Martin, & Sjolander, 2003). Lodging tax waivers could actually encourage labor importation by defraying the cost of housing although the models do not suggest a depressive effect on either employment or wages.…”

The Pass-Through of Temporary VAT Rate Cuts: Evidence from German Supermarket Retail

“…cally limited to several days only, previous studies have documented an almost full passthrough of temporary sales tax exemptions to sales prices (Harper et al, 2003) or even an over-shifting for some goods (Cole, 2009).…”

The Pass-Through of Temporary VAT Rate Cuts: Evidence from German Supermarket Retail

“…Our study is also related to the literature on the price effects of sales tax holidays, i.e., temporary exemptions of specific consumption goods, such as clothes or school supplies, from state sales taxes in the United States. Although these tax holidays are usually limited to just a few days, previous studies have documented an almost full pass-through of temporary sales tax exemptions to sales prices (Harper et al, 2003) or even an over-shifting for some goods (Cole, 2009).…”