Sales Tax Slice: ‘Tis the Season to Consider Tax Policy when Purchasing a Holiday Tree


 

With Black Friday shopping safely in the rearview mirror, folks around the country are gearing up for the holidays. Purchasing a holiday tree is a seasonal highlight for many. Is that a taxable event? Should it be? Read on to find out.

Broadly speaking, the answer is that holiday tree sales are taxable events. Most states impose sales and use tax broadly on “all” sales of tangible personal property. For a purchase to qualify as exempt, the tangible personal property must be of an enumerated type (e.g., medical supplies). Thus, buying a holiday tree would be a taxable transaction. States often stress this by issuing public announcements, such as California and Texas’s broadcast notices explaining that sales of many seasonal items are taxable.

However, things might change in New York if that state’s legislature moves forward with proposed bill to enact a so-called “sales tax holiday” on live Christmas tree sales. [2016 N.Y. S.B. 6232] That bill would create a “Go Green Weekend” for evergreen products, acting as a so-called “sales tax holiday” for sales of fresh trees, wreaths, and garland. That is to say, the bill would exempt purchases of those items from sales and use tax during the first weekend in December each year. The state senator who introduced the bill argues that the exemption would “level the playing field for farmers and consumers alike” and would “help make New York State [the] nation’s capital for fresh Christmas tree shopping.”

Sales tax holidays tend to be divisive from a policy perspective, but the senator emphasizes the difficulty that local farms face when competing against artificial trees and out-of-state farms. He claims that sales of New York-grown Christmas trees have declined by 66 percent from 2002 to 2012.

There is also an interesting battle afoot at the federal level: tree growers and conservative critics have locked horns for four years now regarding a divisive nationwide $0.15-per-tree fee on sales of live trees. That fee initially arose when Christmas tree growers noticed in the mid-2000s that they were rapidly losing market share to sales of artificial trees. To combat the trend, an industry task force successfully lobbied the U.S. Dept. of Agriculture (USDA) to establish a national live-tree marketing campaign that would combat the artificial-tree industry’s increasing market share and advertising. When the USDA acceded in 2011, the result was 7 CFR Part 1214, a regulatory package establishing the marketing campaign and, among other things, self-funding it via a $0.15 “fee” on all live tree sales. Anti-tax critics immediately overwhelmed the USDA with complaints, and the USDA stayed the regulation just nine days later. However, 2014’s farm bill lifted the stay last year, and the program is now effective.

Not all federal legislators are on board with the new program. For example, last December Rep. Michael McCaul (R-TX) introduced a bill to shield “choose and cut” Christmas tree producers from the assessment. [Christmas Tree Exclusion Act, 2014 H.R. 5827] He protested the national marketing program, describing the assessment as a “new Obama tax” and stating that “[s]mall producers . . . shouldn’t be forced to tax their customers to pay for big agribusiness producers to market their products.” Rep. McCaul’s bill is now deal, but even still it represents a striking divergence between conservatives and liberals on tax matters and the government’s role in private industry.

Trade figures suggest that the year-end holidays represent significant sales opportunities for businesses, not the least of which for both live and artificial tree retailers. With 26.3 million live and 13.9 million artificial holiday trees sold nationwide last year at an average cost of $39.50 and $63.60, respectively, one should recognize that significant tax dollars are at play. Whether or not consumers are price-elastic on their holiday tree purchases, perhaps the more important take-away is to recognize that measures such as a sales tax holiday or a per-tree fee arm advocates and critics alike with political ammunition to use throughout the year. So as we approach the holiday season, please try to focus on the important things in your life: your friends, your family, and maybe a bit of tax policy.

Continue the discussion on LinkedIn: What is the role of the government in the live Christmas tree industry? Should legislatures enact measures designed to support tree growers?

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By Ryan J. Voorhees