You Can Pay Your Customers' Sales Tax; You Just Can't Talk About It


Every year from 2003 through 2008, The Boston Globe reports, Massachusetts shoppers have enjoyed "the annual summer rite of a sales-tax holiday." This year the state canceled the holiday even as it raised the sales tax from 5 percent to 6.25 percent. Many retailers responded by announcing that they would pay their customers' sales tax, but it turns out they're not allowed to do that. Under a heretofore obscure statutory provision, "it is unlawful for any vendor to advertise or hold out or state to the public or any customer, directly or indirectly, that the [sales] tax or any part thereof will be assumed or absorbed by the vendor." State Rep. John Quinn (D-Dartmouth) proposed a bill that would have lifted this prohibition, but it was blocked by legislative leaders who worried that a privately funded sales tax holiday would give large businesses an unfair advantage:

In an e-mailed statement, [state Rep. Jay Kaufman (D-Lexington), chairman of the Revenue Committee,] said the bill, "while laudable in its attempt to stimulate retail sales, concerns me because it could disproportionately favor big business retailers over small business 'Mom & Pop' stores. These big-box retailers have the balance sheets to absorb the tax, which small business retailers do not. In this economy, this is hardly the time to put small businesses at such a distinct disadvantage."

Whatever the merits of such protectionist logic, it's hard to see how this law can be reconciled with the First Amendment. Note that it's perfectly legal for businesses to pay their customers' sales tax; they just can't talk about it. Under the relevant Supreme Court precedents, "commercial speech" can be censored only if it's misleading or if it directly advances a substantial government interest and is narrowly tailored to do so. The ads in this case are straightforwardly accurate, and I'm hard pressed to think of any legitimate government interest that is served by suppressing them.

[Thanks to Michael Graham for the tip.]