Massachusetts sales tax holiday weekend scheduled

First, Senate President Karen Spilka, D-Ashland, said Massachusetts residents would enjoy a sales tax holiday in 2023, the weekend of Aug. 12 and 13.

Second, she made clear that through the process of refining and reconciling three versions of a state budget and as many proposed tax relief measures, the Senate leadership is dedicated to helping Massachusetts’ low- and middle-income earners.

Spilka spoke of the Senate’s intentions following a semi-regular meeting Monday with other state leaders: House Speaker Ron Mariano, D-Quincy, Gov. Maura Healey and Lt. Gov. Kimberly Driscoll. The Senate tax relief package was released last week, the House tax relief package was released in April, while the governor released her proposals in February.

Tax holiday is expected to promote consumer spending

It’s been 19 years since Massachusetts enacted its first sales tax holiday; the first one was held in August 2004. State residents have enjoyed the tax-relief measure routinely since 2018.

Any single purchase for personal use that comes in at or under $2,500, with some exceptions, is not taxed. Multiple single purchases – a flat-screen television, a more up-to-date computer, a new appliance – that reach the limit individually even if purchased together, will not be taxed.

However a new television that costs $2,501 will be fully taxed. Clothing retailers will exempt the first $175 of an item that costs more than $2,500 (think designer fashions). Currently, clothing that costs less than $175 is not subject to sales tax.

Which items will still be taxed, despite the holiday?

Items that will still be fully taxed include prepared meals, motor vehicles, motor boats, alcohol, tobacco and marijuana. Other items that will still be taxed during the holiday are telecommunications services, gas, steam and electricity.

According to the Federation of Tax Administrators, 17 other states offer residents tax holidays. Neighboring Connecticut was one of the first to do so, starting its holiday in 2001. Its holiday allows residents to purchase shoes and clothing under $100 tax-free for seven days.

Massachusetts has the most generous tax exemption, although most states' sales tax holidays last more than two days.

According to the Massachusetts government website, all businesses must honor the sales tax holiday, and if any mistakenly collect tax, it must be refunded or passed on to the Department of Revenue.

Massachusetts currently collects a 6.25% sales tax on most purchases, excluding food, some clothing and other necessary items. The tax increased in 2009 from 5% due to budgetary issues.

Only five states do not collect sales tax at all: Alaska, Delaware, Montana, New Hampshire and Oregon. California charges the highest rate at 7.25%, while Colorado collects $2.9%. Massachusetts' tax is about in the middle, with Nevada (6.85%) and New Jersey (6.625%).

In 2021, former Gov Charlie Baker suggested a two-month tax holiday; however the proposal was squelched by the state legislature.

Senate, House members working to reconcile three budgets; three tax packages

Included in the Senate version are increased tax breaks for renters (from $3,000 to $4,000), the doubling of the senior circuit breaker (from $1,200 to $2,400) and increased child and dependent tax credits, (up from $180 per to $300) as well as tax breaks for residents paying for child care, Spilka said.

Earned income tax credits would also increase from 30% to 40% of the federal credit.

Changes to estate tax rate

Spilka said a provision to exempt estates valued at $2 million or less from taxation (allowing a uniform credit of $99,600 per estate) would “help many people of different incomes.”

Hours of discussion and debate within the Senate led the body to omit a proposed cut in the state’s capital gains tax that had been included in the tax relief package proposed by the House. Spilka said the process to reconcile the packages is underway; the conference committee reviewing the budgetary issues has been appointed and members have started meeting.

“We’re trading information on proposals,” Mariano said.

When asked about the snafu in improperly paying out nearly $3 billion in unemployment insurance from federal funds rather than state funds, Healey said the administration is continuing to work with the U.S. Department of Labor to come to a consensus on how much Massachusetts owes Washington.

“We hope to minimize the impact on Massachusetts,” Healey said.

This article originally appeared on Telegram & Gazette: Mass. sets sales tax holiday weekend for August 12 and 13