Baker-Polito Administration Proposes Nixing Sales Tax in August and September

BOSTON — The Baker-Polito administration is filing legislation to establish a sales-tax holiday for the months of August and September. This plan aims to support Main Street businesses and local economies and promote economic growth and opportunity as the Commonwealth continues to recover from the impacts of the COVID-19 pandemic.

State-tax revenues for fiscal year 2021 continue to significantly exceed projections, with revenues to date 14.9% above benchmark. Strong revenues across the board have allowed the Commonwealth to grow the size of its Stabilization Fund and be poised to end the fiscal year with a significant surplus for the FY21 budget. As a result, the Administration is proposing to support the Commonwealth’s taxpayers and downtown economies by designating the entire months of August and September as sales-tax-free.

“A two-month sales tax holiday will provide a boost to Massachusetts’ taxpayers and Main Street economies as we continue to recover from COVID-19,” Gov. Charlie Baker said. “Massachusetts’ economic recovery is off to a good start, but it’s crucial that the Commonwealth takes action now to spur more economic activity in communities and support taxpayers. Thanks to stronger-than-expected tax revenues, the Commonwealth has managed to grow the Rainy Day Fund to a balance higher than it was at the beginning of the pandemic, and we can also afford to return these tax dollars to our residents and small businesses.”

Through May 2021, FY21 tax revenues collections are $3.938 billion, or 14.9%, more than the year-to-date benchmark. Additionally, Massachusetts has been awarded significant federal resources since the start of the COVID-19 pandemic, including Coronavirus Relief Fund dollars through the CARES Act, which have helped reduce pressure on the operating budget.

“A two-month sales-tax holiday is a smart, exciting, and progressive economic incentive that will benefit our small businesses and our consumers just when they need it,” said Jon Hurst, president of the Retailers of Massachusetts Assoc. “Consumers represent 70% of our economy, and it is important that we encourage them to invest in our Main Streets, small businesses, and communities. And for our lower-income families, this tax cut is all about temporarily suspending the most regressive tax on the books just as their children are heading back to school. Retailers and small businesses across the Commonwealth thank the Baker-Polito administration in proposing this important economic-growth incentive, and urge the Legislature to pass it into law.”

If enacted, this proposal would be an expansion of the annual sales tax-free weekend, which the administration is also officially designating as Aug. 14-15 this year. In 2018, Baker signed legislation that makes the annual sales-tax holiday permanent.

The governor’s proposal has already drawn some opposition. For instance, state Sen. Eric Lesser noted that “this proposal would cost $900 million and do almost nothing to help our local retailers. Now that COVID is ending, demand is at record levels. Our local businesses need more workers and better infrastructure, not political gimmicks. Extra funds should be used to reduce class sizes, repair crumbling roads and bridges, improve broadband internet, or use to pay down debt.”