Originally created 07/30/00

Tax break expected to draw shoppers



South Carolina's upcoming "sales tax holiday" on back-to-school items is creating a retail bonanza that will rival the day after Thanksgiving, retailers say.

Georgia residents surely will take part in the shopping spree when the three-day tax rollback begins Friday.

"There's just something magic about not having to pay tax," said Jim Hatchell, president of the South Carolina Merchants Association. "We know from the experience of other states that (sales tax exemptions) just really bring the people out."

The holiday, which begins at 12:01 a.m. Friday and ends at midnight Aug. 6, exempts hundreds of items from the 5 percent state tax and 1 percent local option sales tax.

Nearly all clothing and most traditional school supplies are exempt, but the tax holiday also applies to big-ticket items such as computers and software and even items rarely seen at school, such as furs and tuxedos.

The sales tax holiday was approved by South Carolina officials last month to ease the tax burden on parents providing for their children's education.

But all shoppers, regardless of where they live or whether they have school-age children, can enjoy the temporary tax break that amounts to a $6 saving on every $100 spent.

South Carolina Gov. Jim Hodges made it a point to invite shoppers from Georgia and North Carolina when he announced the sales tax holiday earlier this year.

"Anyone can buy clothes and other items during the holiday - tax free," he said.

Augusta retailers say the promise of big savings in North Augusta and Aiken likely will pull a large number of shoppers away from their stores all weekend long.

The 6 percent sales tax savings, they say, is apparently a bigger hook than a "20 percent off" sale.

"Our stores in South Carolina are expecting big sales on those days," said Mike Autry, manager of Augusta's Target store. "They're preparing as if it was the day after Thanksgiving."

The day after Thanksgiving is traditionally the busiest shopping day of the year.

Because Augusta is the retail center of the five-county metro area, some retailers said the holiday will pull only consumers who have big-ticket items to purchase.

"I wouldn't drive an hour unless I was making a major purchase," Stein Mart Manager Gwendolyn Knight said. "If it turns out that everyone does their shopping (in South Carolina during the holiday), I'll be really surprised."

But if South Carolina's sales tax holiday generates the same results as similar holidays in other states, Georgia stands to lose millions in revenue.

New York, for example, took an estimated $400 million in retail business from New Jersey last year, according to University of South Carolina professors who studied the impact of sales tax holidays in that state, Texas and Florida.

Georgia legislators, not wanting to lose revenue annually to South Carolina and Florida, are considering instituting a sales tax holiday for the Peach State.

"We see it as something that is inevitable," said Rep. Ron Borders, D-Valdosta, sponsor of House Bill 1239, which would create a nine-day sales tax exemption.

Mr. Borders said his district loses business to nearby Florida, which created its seven-day sales tax holiday three years ago.

The bill, sponsored in the Senate by Sen. Tim Golden, D-Valdosta, is a redrafted form of legislation that was introduced last session but never got out of committee discussion.

The legislation likely will move faster this year now that South Carolina has become the fourth state in the country to adopt an annual sales tax holiday. The bill's sponsors plan to meet with Gov. Roy Barnes on Aug. 25 to discuss the proposal in detail.

"We think that we will eventually be able to work this thing to fruition, if not this legislative session, then the next legislative session," Mr. Borders said. "It is something whose time has come."

Officials in fiscally conservative Georgia may be wary of the sales tax loss, but University of South Carolina research has found states with tax holidays break even during the period because consumers tend to fill their carts with nonexempt items as well.

In South Carolina, for example, the university predicts overall sales for the weekend will be as much as 45 percent higher than last year's, which would more than offset the $4.5 million sales tax loss.

"The notion that people don't have to kick in a little bit extra to the state government makes them feel better about going out and buying stuff," said Donald Schunk, research economist at the university.

Nonexempt items include jewelry, cosmetics, linens, eyeglasses and briefcases. Exempt items will be taxed if they are rented, bought on layaway or used in a trade or business.

The South Carolina Department of Revenue mailed the long list of exempt and nonexempt items to more than 130,000 retailers in mid-July.

Logistical problems associated with not charging sales tax have been reported by some retailers, but most businesses seem ready for the tax holiday, the department said.

"Some special attention has been given to the smaller stores, the mom-and-pop stores," department spokeswoman Jeri Birkes said.

Most retailers still are gearing up for the weekend event, studying the exempt/nonexempt list, hiring additional personnel and reprogramming registers. Most plan to operate on extended hours.

"We're scheduling our employees for a busy weekend," said Bill Bonsor, manager of Kmart's Big K store in North Augusta.

Tax takes a holiday

A look at the sales tax holiday on school supplies in South Carolina:

Starts at 12:01 a.m. Friday and ends midnight August 6.

Exempts most clothing, shoes, accessories, stationery, computers and software from the 5 percent state sales tax and the 1 percent local-option sales tax (some areas of South Carolina have a 2 percent sales tax).

Excludes jewelry, furniture, hardware, housewares, linens and stereo equipment. Exempt items are nonexempt if rented, purchased on layaway or deferred delivery plan, or used for business purposes.

Applies to purchases made by anyone, regardless of age, family status or state residency.

For further information, contact the South Carolina Department of Revenue at www.dor.state.sc.us.

Reach Damon Cline at (706) 823-3486.