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Area retailers cash in on state sales tax holiday
By Rachel Pleasant
Staff Writer
C.J. Shahid Jr. can uncross his fingers now and get busy counting his cash drawer.
Shahid, like many other small retailers, eagerly awaited South Carolina’s sixth annual sales tax holiday, hoping it would be a stronger weekend than the tax-free days of 2003 and 2004.
“It hasn’t been as vigorous as when it first came out,” says Shahid, who owns Shahid’s Uniform Shop at 1757 Savannah Highway in Charleston.
According to the state Department of Revenue, the amount saved by taxpayers during the tax-free weekend, when both state and local sales taxes are waived, was $3.6 million in 2000. That number declined as years passed, reaching a low of $2.3 million in 2003 and rebounding only slightly to $2.7 million in 2004.
The revenue department does not keep figures on how much cash is actually spent on tax-exempt items during the holiday—things such as clothing and school supplies—but the amount saved by consumers directly correlates to the amount they spend, says department of revenue spokesman Danny Brazell.
“For instance, last year, when they saved $2.7 million, that means they spent roughly $55 million on tax exempt items,” Brazell says after a few quick calculations.
The reason for the decline in tax-holiday spending can be attributed to a number of factors, he says.
“I can only speculate, but the first year, it might have been the novelty of it. Then it became kind of routine,” Brazell says.
“Also, the timing was bad because after the first year, the economy went soft. That had something to do with it. Also, Georgia and North Carolina added their tax-free days after we did, so there might have been a reduction from people crossing the state lines.”
Brazell cautioned that a number of factors influence the tax-free turnout—for instance, rain is a deterrent—but he expects the 2005 tax holiday will continue the upward trend set in 2004. A number of items were added to the tax-exempt list this year, including bedding, which may help to boost sales figures. The Department of Revenue will not have data from the weekend until October.
Shopping spree
In the days leading up to this year’s tax holiday, employees at Shahid’s Uniform Shop geared up for an onslaught.
If ever taxpayers needed to save a few bucks, this is the year, Shahid says.
“Right now, with the price of gas being up and the property tax reassessment and the (Charleston County) sales tax being up half a cent, people will probably respond very favorably,” he says.
In the uniform business, August, when schools reconvene, is like a toy store’s Christmas. This will be Shahid’s best month, with or without stellar tax-free sales. But for a small business owner, every little bit helps.
“We do a substantial amount of business,” Shahid says, referring to the tax-free weekend, though he declined to give specific sales figures. “It brings in people we wouldn’t normally see.”
Shahid estimated a typical purchase is between $100 and $120 in uniforms per student. During the tax holiday, Shahid anticipated assisting “several thousand people.”
The substantial increase in business is offset somewhat by Shahid’s increased payroll during the tax-free weekend. Because it is a busier time, he has more people on the sales floor. In preparation for the tax holiday, Shahid also orders extra inventory, ensuring there are enough khaki pants and collared shirts to go around.
The kickoff
At Munchkins, a Mount Pleasant children’s clothing store, the sales tax holiday helps to jumpstart the store’s busy season.
“We pretty much don’t get to stop. It’s always a really good Friday and Saturday,” says manager Charlotte Hammond.
Business at Munchkins nearly doubles during the tax-free days, both in the number of customers and the number of sales.
Though small businesses may not experience the volume of business a Wal-Mart or Target may experience during the tax-free weekend, Hammond says the most vulnerable businesses rely on such incentives to survive the long, hard summer and make it to the holidays.
The tax-free holiday is meant to give consumers a break just before school starts, which is Aug. 8, in the case of public schools, but stores that do not sell the usual school-related merchandise also look forward to a sales bump during the tax holiday.
“We usually do pretty good,” says Marshall Simon, owner of Gwynn’s in Mount Pleasant, a store that sells men’s and women’s apparel, and home accessories.
At Gwynn’s, a pair of jeans can cost nearly $200, and a king-sized flat sheet goes for $110. During the tax holiday, the savings on those items are $13 and $7.15, respectively.
Such high-end prices mean Gwynn’s does not see a tremendous increase in customers during the tax-free holiday, but Simon says, even an extra customer or two means all the difference.
“It gets people out shopping that weekend. It’s like an event,” Simon says. “I’m happy that the government recognizes the difference it makes.
Rachel Pleasant is a staff writer for the Business Journal. E-mail her at rpleasant@charlestonbusiness.com.
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