Franchot kicks off Maryland sales tax holiday

After two years of enjoying a break on the state sales tax every August, many Maryland consumers now plan theirback-to-schoolshopping around the weeklong event.

That's one measure of the success of Maryland's Tax Free Week, which will mark its third year when it begins Sunday, state and retail industry officials said.

During the tax holiday, which runs until midnight Aug. 18, consumers won't be charged the state's 6 percent sales tax on most clothing and footwear priced under $100.

The sales-tax-free week costs the state about $10 million in lost revenue, state Comptroller Peter Franchot said Wednesday during an announcement at Baltimore's Mondawmin Mall to publicize the event.

But, Franchot said, the week attracts shoppers who buy more than just tax-free items.

It "more than pays for itself in increased sales," Franchot said, adding that "for businesses both big and small, it's a very important week."

The chance to save money will be an incentive to head back to Mondawmin, said Doreen Gainer, a Forest Park resident who on Wednesday was buying new shoes for her 12-year-old son and 10-year-old daughter. She said she planned to return to buy school clothing next week.

"I think it's great," Gainer said of the tax holiday. "I think it should be all the time. It's very important for me to save any time I can."

Tax-free periods, now offered in 18 states, have gained in popularity, said Kay Bell, contributing tax editor at Bankrate.com, a Florida-based website that tracks personal finance issues.

"Retailers tend to like them, even though it's more cost for them tracking what's tax-free and what isn't," she said. "They hope that [shoppers will] end up buying more than they intended."

Franchot was joined Wednesday by industry and state elected officials who urged consumers to get off the Internet next week and out to local malls and shops. As a group, retailers are the biggest private-sector employer in the state, employing more than 400,000, according to the Maryland Retailers Association.

At Mondawmin Mall, the tax holiday "increases foot traffic and we see an increase in sales," said Romaine Smallwood-Smoot, general mall manager. She expected even better results this year because, she said, "consumers are feeling more relaxed with the economy."

Back-to-school buying, mostly in August, represents the biggest sales season for retailers except for Christmas, said Patrick Donaho, president of the retailers group. The week gives Maryland retailers a chance to compete with those in Pennsylvania, where most clothing and footwear are exempted year-round, as well as with retailers in Delaware, which has no consumer sales tax.

He said Maryland retailers have seen sales at individual stores grow from 8 percent to 12 percent during tax-free week, and many are looking for similar results this year.

"Consumers are now starting to plan for it," Donaho said.

Franchot said the tax-free week should be expanded to include not only apparel and footwear but other back-to-school purchases, such as backpacks.

"It's too narrow right now," he said of the week, which was approved by the General Assembly in 2007 and took effect in 2010.

This year, most states' sales-tax holidays are geared to back-to-school spending, according to the Washington-based Federation of Tax Administrators.

Most states offer sales-tax breaks on clothing and footwear priced under $100. But some do include school supplies. In several states, including Alabama, Georgia, North Carolina, South Carolina, Tennessee and Missouri, purchases of certain computers are also exempt from sales tax.

Lawmakers see tax holidays as a way to keep voters happy, Bell said.

But, she added, it's hard to say whether consumers end up buying more than they would have without the tax break.

"Consumers have become pretty savvy about how to save money," Bell said.

lorraine.mirabella@baltsun.com

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