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Professor Yu Hu, Bertolon School of Business marketing professor, interviewed for article in Salem New

Assistant Professor Yu Hu

SalemNews.com, Salem, MA August 8, 2012
A break from sales tax
Consumers and businesses benefit from holiday

By Ethan Forman
Staff Writer

 — Supporters of the upcoming sales tax holiday call what brings out shoppers the “Boston Tea Party effect.”

“The sales tax is one tax you can avoid, and consumers do,” said Bill Rennie, vice president of the Retailers Association of Massachusetts.

Last week, state lawmakers approved a tax holiday for this Saturday and Sunday. Besides being an opportunity to stick it to the state, it’s also a chance to save money. Customers save $6.25 on every $100 they spend.

That adds up when buying big-ticket items.

“There’s an opportunity to save some money,” said Tom Kulevich, vice president at Tri-City Sales in Salem and Ipswich, “especially if they are doing a large kitchen remodeling and they are buying some pieces.”

What is at play in the minds of consumers?

“Basically, for value-conscious consumers, a penny saved is a penny earned,” said Yu Hu, an assistant professor of marketing at Salem State University who has studied consumer psychology. “For many customers, the sales tax holiday is a discount.”

Consumers like to shop tax-free, Hu said, and many feel better about buying something that is tax-free rather than buying an item with a 10 percent discount.

However, Hu offered a warning: Shoppers who stumble onto the tax holiday and find they are getting an unexpected bargain may be the most susceptible to overspend. That’s because the unexpected discount may put shoppers in a better mood, and, Hu said, shoppers who are in a good mood tend to shop more impulsively. Hu recommends shoppers plan ahead, make a list and stick to it.

Lauren Dalis, area director of marketing for the Northshore and Liberty Tree malls, said customers often use the tax holiday to save on expensive items like laptops and other electronics. “It just gives them that added bonus and that added incentive to go out and purchase them that weekend and not wait another month,” she said.

Kim Gray of Marblehead plans to take advantage of the savings. She is moving across town this month and had planned on buying appliances anyway.

“It’s good to encourage pushing it to get the purchases you need and also to save a little money and shop locally instead of shopping online,” Gray said.

Last year, Mark and Dolores Finlay of Lynn took advantage of the holiday to buy a snowblower. This year, they aren’t planning any major purchases.

“It depends on what we need,” Dolores Finlay said. “We have to go by the budget.”

“I think it’s great for people who have to make volume purchases,” said Ann Marie Pendleton of Wenham. “I think what it does is it encourages people to spend, which is what its entire purpose is, and I think that’s a good thing for the economy.”

The Retailers Association expects the weekend to generate $500,000 in total sales. That’s the kind of sales activity stores normally see during a weekend in December, Rennie said.

“We are excited for the tax-free weekend,” Dalis said. “It’s really a win-win for the shoppers and for the businesses.”

It’s expected lines will form in front of the Apple Store in the Northshore Mall in Peabody, for instance, and traffic will jam area shopping centers.

“If you talk to retailers, there is just something about the sales tax holiday that gets people out,” Rennie said.

Staff writer Ethan Forman can be reached at 978-338-2673, by email at eforman@salemnews.com or on Twitter at @DanverSalemNews.

SALES TAX HOLIDAY Saturday and Sunday, Aug. 11 and 12 Save $6.25 on every $100 spent. Individual items costing more than $2,500 are not tax-exempt.