Legislators to mull sales tax holiday

February 05, 2005|by TAMELA BAKER

ANNAPOLIS - Shopaholics, take note.

Families preparing to send their children back to school next fall could get a break from the state if the General Assembly approves a bill to offer a tax holiday on clothing purchases in August.

Sponsored by Del. Jean Cryor, R-Montgomery, the bill would allow shoppers to purchase items of clothing or footwear within state enterprise zones without paying the state's 5 percent sales tax from Aug. 24 through Aug. 28 - so long as the taxable price of the purchase is less than $100.

"I'm a veteran shopper, so I could be an expert witness on this," Cryor said.

She called the tax break a "paperless coupon."

A similar tax-free week in 2001 likely cost the state about $5 million in sales tax revenue, according to the Comptroller's Office. Nevertheless, Comptroller William Donald Schaefer supported the bill this week, saying businesses would profit by keeping sales in Maryland that otherwise would be lost to neighboring states that do not charge sales taxes on clothes.

"I strongly suggest you do this," Schaefer told members of the House Ways and Means Committee during a hearing on the bill this week. "It will not hurt us."

Schaefer's office estimated tax losses would be considerably lower under the current proposal because the exemption is limited to enterprise zones.

In Washington County, for example, the exemption would apply to retailers along Main Street in Hancock, in downtown Hagerstown and on a portion of Wesel Boulevard south of Hagerstown, according to the Washington County Economic Development Commission. Shopping meccas such as Valley Mall, Prime Outlets and the Centre at Hagerstown are outside the enterprise zones.

Tom Saquella, president of the Maryland Retailers Association, also testified in favor of the bill. While the association did not support similar proposals in the past, Saquella noted that retail sales rose about 25 percent during the tax holiday in 2001.

"'Tax-free' is a very, very powerful marketing tool," he said, that has greater impact than a sale. "Legislators got more thanks for this tax break than they did for a 10 percent income tax break."

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