Buyers trying to beat hike in state sales tax
Retailers of big-ticket items from refrigerators to cars are preparing for shoppers to come in droves this weekend and make purchases before the sales tax jumps to 6.25 percent on Aug. 1.
Area car dealers say they already have seen an increase in customers and sales this month.
“This is the best month we’ve had in 45 years,” said Don McEwen, general manager of Lundgren Honda in Auburn. “It’s completely unexpected. It’s amazing.”
Herb Chambers, who owns 46 car dealerships in Massachusetts and Rhode Island — and seems to be the only dealer opening new locations this summer — said sales have picked up month after month this year.
“If somebody was planning on purchasing a car in August or September, it’s probably worthwhile for them to buy it in July and save that tax,” Mr. Chambers said. “If you weren’t planning on buying a car this year, then there would be no incentive.”
A customer buying a $25,000 Honda Accord would pay $312.50 more in tax if the purchase was after July 31. For a $44,000 BMW sedan, the tax would be $550 higher after the end of the month.
The sales tax increase is on people’s minds, said Mark Wagner, president of Wagner Motor Sales, which has dealerships in Shrewsbury and Boylston. “This weekend will be the tell-tale, I believe,” he said.
“(Sales) have been touch and go. It’s tough to forecast … People are waiting a little bit longer and seeing what’s out there.”
Bob and Sylvia Myhal walked into the Wagner Kia showroom in Shrewsbury yesterday afternoon, and a little while later, they walked out as the owners of a new Kia Amanti, a $32,000 sedan.
Mr. Myhal said he was pushing to buy a new car before the sales tax hike. “On small purchases, it won’t matter, but on large purchases, it’s going to hurt a lot of people,” he said.
The incentive of a lower sales tax is not the only thing motivating car shoppers. Perhaps the bigger incentive is the federal government’s Car Allowance Rebate System, better known as the cash for clunkers program, which rolls out today.
The program allows owners of old, inefficient “clunkers” to trade them in for a $3,500 or $4,500 rebate toward purchases of new, fuel-efficient cars. The old gas guzzlers get scrapped. Details are at www.cars.gov.
The staff at Lundgren Honda has written more than 20 advance orders for customers taking advantage of the federal program. The Honda Fit, which gets 30 miles per gallon, highway and city combined, is one of the most popular sellers, according to Mr. McEwen.
Dennis P. Pietro, Internet sales director at Harr Toyota on Gold Star Boulevard in Worcester, said customers are looking for economical cars, like smaller SUVs, or pre-owned rather than new vehicles. Business has increased 20 percent over last month.
“By the weekend we’ll probably see 30 to 35 percent more,” he said.
He’s not happy about the sales tax increase. “I think the government is a bunch of (expletive) morons,” Mr. Pietro said. “It is what it is, I guess.”
Lawmakers have said raising the sales tax was necessary to avoid steep budget cuts to important services, including public transit. Retailers say higher taxes will drive more shoppers to the Internet and to New Hampshire.
Jon B. Hurst, president of the Retailers Association of Massachusetts, said retailers have been struggling because of the recession, and because of poor weather in May and June. “Now we’re staring down the barrel of a 25 percent sales tax increase,” he said. “A lot of (retailers) are somewhat shell shocked by the tax increase.”
Although support for another summer sales tax holiday is hard to find on Beacon Hill, retailers are pushing for it. Mr. Hurst said that the holiday did not spur as much spending last year as it did in 2007, but, he said “More than any year prior, we could really use it this year.”
The state said it lost $15 million in sales tax revenue during the tax holiday last year, but Mr. Hurst said that money is made up in other ways: more people working on the weekend means more income tax revenue, and more people shopping means more meals tax and gas tax revenue.
Bernie Rotman, vice president of Rotmans Furniture & Carpet in Worcester, said he’s expecting many customers to make purchases over the next week to beat the sales tax hike. “I think it’s going to be a good thing, but it’s short-lived, and it’ll be a bump,” he said. “Far more impressive would be a sales tax holiday.”
Some stores, including Rotmans and Percy’s, a Worcester TV and appliance store, are offering a 5 percent discount as another incentive to customers.
“They all say the same thing, ‘We want to buy it before August 1,’ ” said Alan Lavine, sales manager at Percy’s, where shoppers are looking for refrigerators, TVs, washers and dryers.
As for what happens in August: “There could be a backlash,” he said. “I’ll worry about that when it happens.”
Contact Priyanka Dayal by e-mail at firstname.lastname@example.org.