Will Connecticut Tax-Free Shopping Week Be A Boon For Merchants?

The economy is bad. The world, national and state news regarding financial markets, debt, recessions, is grim. In Connecticut, a series of tax changes took effect July 1 that were enacted in an effort to eliminate the state’s massive deficit, but the end result may still not be enough.

“There’s been a lot of angst the last few weeks,” said Tony Sheridan, president of the Chamber of Commerce of Eastern Connecticut. “These have been tough weeks on everybody, from the small merchant to the retiree. There is a huge amount of uncertainty.”

Two of the changes were an increase in the retail tax from 6 percent to 6.35 percent, and the elimination of no tax levied on purchases under $50.

One bright spot for both retailers and consumers alike, however, is Tax-Free Week, which runs from today to Aug. 27. During this period, the state will not levy taxes on clothing and footwear purchases under $300.

“The tax exempt week is very important,” Sheridan said. "It provides a little relief, like a couple of good aspirins when you have a bad headache.”

Ellen Cavanagh, Executive Director of the Clinton Chamber of Commerce, said members aren’t talking so much about the retail tax changes, as they are about the new taxes on personal services.

"People aren't exactly clapping,” she said. “They are not saying ‘this is great,’ which is the response you would expect."

The tax-free week “is a beautiful thing and the timing before school is great," she said. "I bet this year people will pay more attention to the dates of the tax free week and we will see a particularly heavy week of shopping in town. It is very helpful for those watching their budgets."

In a touristy town like Stonington, the retail tax changes have not had a noticeable affect on shoppers, said Wendy Bury, chairman of the Stonington Borough Merchants Association.

“Many customers, especially visitors to the area, are unaware of the change and the CT sales tax is lower than its neighboring states,” Bury wrote in an email. “There has been discussion and complaints about the tax increase by CT residents and locals, but it has not stopped people from purchasing desired items or putting things back on the racks/shelves. In general, people are unhappy about the overall tax increases in our state, but a few cents on the dollar increase has not changed shopping habits on items under $50. As the retail price increases, obviously, the tax change has an impact.”

And while Bury and the 50 members of the SBMA welcome any help from the state to improve the economy, the tax-free week may not have a huge impact in the village.

“A tax-free week promotes shopping in general and some retailers will benefit far more than others,” Bury wrote. “Tax-free weeks generally occur at the end of the summer as a back-to-school shopping incentive, and the stores in the boro are not primarily geared towards this market, but any promotion of shopping, and shopping locally, is a benefit to retailers.”

Chris Freeman, chairman of the board for the Greater Mystic Chamber of Commerce, said growing commerce is a better way to increase revenues to the state, rather than raising taxes.

"Any new tax, levy or fee has a dampening effect on demand," he wrote in an email.  "The impact on our member businesses from all of the changes in state and federal taxes is as varied as the businesses themselves. Overall, any tax or public policy that dampens consumer demand is detrimental to growing commerce."

As for the tax-free week, Freeman wrote that only a few of the chamber's 740 members will benefit.

"Some consumers and some businesses will  benefit from CT Tax Free Week, and generally it is a nice idea. Unfortunately, it really only applies to a very narrow range of 'discretionary purchases' on apparel and footwear. Thus, many consumers and retailers will not derive any benefit. Something is better than nothing especially with the malaise in the broader economy."

To read the legalese about the week, click here.