Where Not to Go on the Sales Tax Holiday
This time last year I was considering buying a laptop for my first year at college. I decided to wait until the sales tax holiday. Normally, I would have purchased the laptop at Best Buy in St. Peters. Because St. Peters opted out of the holiday and charged the full local sales tax, I decided to cross the river and purchase my laptop in Saint Louis.
The Department of Revenue (DOR) announced that 169 cities, 50 counties, and 62 special districts will opt out of the sales tax holiday this August 5-7. The opt-out will require consumers to pay local sales taxes as enacted by the municipality or county but will leave the exemption on the 4.225 percent state sales tax in place.
But what’s the point of a sales tax holiday if municipalities can opt out?
The resulting dissimilarity in tax rates among Missouri’s municipalities distorts consumer behavior and impacts local vendors unequally. For example, vendors in municipalities that have enacted local sales taxes and have opted out will suffer because local consumers will purchase goods in neighboring municipalities that offer the full exemption. In my case, the local Best Buy lost my business due to no fault of its own.
Be sure to check out previous Show-Me Institute opinions about the sales tax holiday.