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'Tis the season -- for tax-holiday shopping

By Debbie Swanson

WESTFORD, Mass (Reuters) - Massachusetts has been dubbed "Taxachusetts" by critics of the state's taxes but at least for this weekend residents will get a break.

On August 13 and 14, Massachusetts is hosting a sales tax holiday weekend, giving consumers a respite from its 6.25 percent sales levy.

Backers hope the tax-free weekend, the seventh to be held in Massachusetts since 2004, will lure consumers to spend despite the pressures of stubbornly high unemployment rates and a bleak economic climate.

Offering a break from sales taxes has gained momentum across the country in the last decade. Seventeen states, including Arkansas for the first time this year, have sales-tax holidays in 2011, which are typically scheduled for August to attract back-to-school shoppers seeking uniforms, clothing and supplies.

In Massachusetts, consumers saved nearly $20 million during last year's tax holiday, according to the Department of Revenue.

The holiday can produce a "Boston Tea Party effect," referring to the famed colonial protest of 1773, by giving today's consumers a break from the state's tax demands, said John Hurst of the Retailers Association of Massachusetts.

"It particularly helps lower-income families to stretch their dollars on important household and back-to-school purchases," he said.

The holiday in Massachusetts will repeal the sales tax on single items costing less than $2,500, excluding vehicles, motorized boats, tobacco, meals and utilities. Internet purchases paid for on the two holiday days are included.

Massachusetts' $2,500 cap is more generous than the limit in many other states, where caps typically range between $100 and $300, with a higher allowance for computers or appliances.

Tennessee kicked off its first sales tax holiday in 2006, and consumers save an average of $8 million each time, according to the state Department of Revenue. The now-annual event is held on the first weekend of August.

"Retailers fully embrace it. They market it heavily," said Billy Trout, a department spokesman.

Florida's 2010 sales-tax holiday provided an increase of $7 million in tax revenue, based on higher sales of taxable items of $115 million, according to a study by the Washington Economics Group commissioned by the Florida Retail Federation.

Total sales during August for goods affected by the tax holiday were $293 million more than they would have been otherwise, the study said, and major retailers surveyed said sales of all merchandise increased by 7.6 percent for August 2010 compared with August 2009.

"It is a win-win-win for everyone. Consumers win with lower prices, retailers win with additional sales, and the state wins because of the economic stimulus the tax holiday provides," said Rick McAllister, president of the Florida Retail Federation.

In Louisiana, which had its first tax holiday in 2007, retailers see sales increase 10 to 30 percent over the tax-free weekends, said the Louisiana Retailers Association.

In Oklahoma, the 2010 sales tax holiday weekend saved shoppers nearly $7 million in sales taxes, according to the state Tax Commission.

(Editing by Ellen Wulfhorst and Peter Bohan and Kenneth Barry)

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