Local businesses gear up for tax holiday

Friday, July 20, 2007

By Linda Redeffer

Business Today

Customers gathered at a Cape Girardeau J.C. Penney customer service desk to pay for their selections on the last day of the tax free weekend Sunday, August 7, 2005. (Don Frazier)

Call it Christmas in August -- for retailers.

The sales tax holiday for back-to-school purchases -- the first weekend in August -- is a boost for retailers, but cities tend to be lukewarm about it, even those who participate in it.

Retailers like Target and JC Penney are preparing for the onslaught of customers, some of whom come from nearby communities and states to take advantage of the savings on school clothes and supplies for their children.

"We have been corporately doing training and preparing for six weeks already, as far as staffing, getting merchandise out, keeping merchandise filled," said Sarah Grigaiti, manager at JC Penney in Cape Girardeau.

Last year, she said, JC Penney had to bring in 40 extra people just for the back-to-school tax holiday weekend, she said.

Back-to-school shopping is second only to Christmas in revenue for stores.

"It's not as big as Thanksgiving weekend, but we may do more volume in our children's area than we do two weeks out from Christmas," Grigaiti said. "It's like Christmas in our children's area that weekend. It's pretty crazy."

"It's our biggest shopping weekend of the year," added Tom Prendergast, manager at Target in Cape Girardeau. "We're definitely looking forward to it."

Target is preparing its advertising brochures and meeting with its staff to finalize plans for making the weekend successful for Target guests, he said.

Both store managers say that the sales curve from the back-to-school tax holiday determines how much merchandise is stocked. Ordering of merchandise is done at the corporate level for both stores, and how much is ordered is based on sales figures from the previous year. Since the tax break began three years ago, Grigaiti said, there are strong numbers now to show how much the stores will be able to sell.

In Cape Girardeau County shoppers will not have to pay state or local sales taxes on back-to-school items within certain dollar limits. Items exempted from sales tax include clothing or shoes under $100 per item; school supplies at $50 per purchase; computer software less than $3,400 and personal computers and computer-related equipment less than $3,500.

All state sales taxes throughout Missouri will be exempt, but some communities opt out of the holiday and will still charge local sales tax.

One such community is the Bootheel community of Kennett, Mo. If Kennett residents went elsewhere to shop for back-to-school items to get a bigger sales tax break, it did not seem to affect the city's revenue, said city manager Ken Goslee.

Overall, at the end of the fiscal year, "we ended the year 5 percent up," he said.

It does not seem likely that Kennett will change is position on lifting the city's portion of the sales tax that week end.

"I've never worked in a city that did not opt out," Goslee said. "I've never heard much of an argument for it."

Cape Girardeau will again offer the sales tax holiday, but are less than enthusiastic about it. City manager Doug Leslie said that originally, when the state passed the law enacting the holiday, the idea was that whatever cities lost in tax revenue on clothing and supplies would be made up in other purchases that weekend.

"We really haven't seen that occur," he said. "We have not seen the positive impact everyone was hoping for."

Leslie estimates that last year the city lost around $50,000 in tax revenue because of the tax holiday.

According to reports from 2006, the city had initially decided to opt out in 2006, but local merchants convinced the council to reconsider.

"We're glad the community supports it," said Grigaiti of Penney's. "We want to do all we can to help people in the community save a little money. Shopping for school is expensive."

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