Hurricane Season Tax Holiday Draws Crowds
By George Anderson
The official start of hurricane season begins tomorrow and consumers in South Florida have been stocking up with supplies during a special 12-day tax holiday.
The tax holiday, reports the Miami Herald, doesn’t give consumers an across-the-board break but it covers items such as flashlights, storm shutters and generators that
cost at least $1,000.
Many retailers have run short on stock while others are completely out of key items.
Rick Case, owner of Rick Case Honda Powerhouse in Miami, said he has sold more than three times (1,000) the number of generators his business moved last year (300).
“Nobody expected sales to be this good,” he told the Herald. “We are used to having a constant supply. It’s getting to be a problem.”
Retailers are restocking supplies as quickly as possible to meet demand as the tax holiday comes to a close.
Many stores are finding that products beyond those covered during the tax holiday are moving briskly, as well.
Henry Taulien, manager of Outdoor World, said his store was out of stoves even though they were not covered.
“It’s an excuse for a lot of people to get excited about getting ready for the season,” he said.
Moderator’s Comment: Do so-called tax holidays result in an incremental lift for retailers or do they simply shift
sales from one period to another? – George Anderson – Moderator
Perhaps the major impact of these tax holidays is to concentrate the mind and the attention to a particular need. In the case of Florida and emergency preparedness items, this is all the more relevant as there are benefits to consumers, retailers and the state. All in all, a good deal in terms of savings, sales and PR. If Jeb Bush doesn’t become president of the U.S., maybe he will become president of Wal-Mart.
As another South Floridian, I can tell you that the tax holiday spurred me to buy, and I did buy some impulse items I wouldn’t have ordinarily bought.
I agree; generators, shutters and the like are pre-planned – I sure didn’t wait for the tax holiday to buy MINE (after Wilma, I vowed “never again”)…but the “when” of batteries, etc, came sooner because of the holiday.
I don’t know how it works for other sales tax holidays that are not disaster oriented, but that’s definitely how it worked here.
People love paying no sales tax. Certainly it’s part of the great appeal of online shopping. Since much of the hurricane merchandise wouldn’t have been purchased without the tax holiday incentive, it certainly adds to incremental sales. Tax holiday shopping spurs impulse shopping and without impulse shopping half the retail stores in this country would be gone.
From the data I have seen on sales tax holidays, the idea of incremental sales simply does not exist, or is so small as can not be measured. In New York and New Jersey, sales tax holidays for back to school clothes has not added to any sales, just shifted the buying date.
I have some news for Henry Taulien: people do not get excited about getting ready for hurricane season; they simply get ready for hurricane season. As a Floridian I can attest to this.
The tax-free days do provide a degree of incremental lift in sales, but this happens on lower ticket items. In other words, people are more likely to make impulse purchases on flashlights and small supplies because they are not charged a tax. The majority of consumers planning to buy generators or storm shutters have decided this in advance; therefore, you see a spike in sales and demand at this specific time. If the tax relief did not exist, sales of these items would be spread over a longer period of time.
I don’t have any data to support whether these tax holidays shift business or not, but anecdotally, my clients always report a lift in overall sales the month of the tax holidays. There is no doubt that consumers will hold off on major purchases for the tax holiday but inevitably they end up spending more than if there wasn’t a tax holiday. What’s interesting is how you can motivate people to spend more money by not having to pay say a 5% tax, but you couldn’t motivate them if you ran a 5% off sale. I guess we all just want to get that little extra feel good that we “stuck it to the man.” (Or woman, if the governor is a she.) I think it was very smart of Florida to do this, as it motivated people to prepare for hurricane season which ultimately could save the local and state governments money in the long run.
Doug raises a good point about the timing. Having the tax holiday just as hurricane season is about to start probably spurs people on to prepare. Especially in view of predictions that it could be as bad as last year. But I think, as he also says, there is an element of triumph in getting a bargain – a point I raised yesterday when we were discussing how overseas retailers should approach the American market. There is little or nothing that pleases shoppers as much as believing that they are getting a discount or saving money. I would be surprised if incremental sales covered more than the little extras people pick up while they are in the stores making the most of the tax free items. My guess – and it is purely that – is that they are buying the tax free items deliberately at this time because of the break, not just because of the weather.