Looming over the 405 Freeway near Culver City, a 50-foot-tall electronic sign for Airport Marina Ford has flashed "buy now" in bright red letters for the last month, a reminder to passing motorists to beat the April 1 sales tax increase.
"The clock is ticking," said Dan Theroux, general manager of the car dealership. "If you're buying a new car, it's going to save you hundreds of dollars to buy before the end of the month."
With the statewide sales tax set to rise 1 cent on every dollar next Wednesday, retailers are gearing up for a huge sales weekend. Car dealers have launched a full-on advertising blitz and store associates are urging indecisive customers to take advantage of current prices.
But a strong end of the month could be replaced by even tighter consumer spending once the tax hike kicks in. Although the increase is relatively small, retailers worry it could deliver yet another blow to the battered sales business, especially for merchants who peddle big-ticket items such as cars, furniture and electronics.
"Anything that's going to make it tougher for us to sell cars, we're not happy about," Theroux said. "We recognize that it's a necessary evil but at this stage in the game, it's just making things more challenging because it's adding cost to the car that's being passed on to the consumer."
For stores that have seen sales slump in recent months as consumers limit their discretionary spending, the increased tax could cripple business even further.
"It's like putting another nail in the coffin, it really is," said Ivy Fradin, owner of PJs Sleep Co., a furniture and mattress store in the Fairfax District. "The government tells you to spend and gives you money, but when you go out and spend, we're going to charge you more."
The temporary 1-percentage-point tax increase will expire on July 1, 2011, or July 1, 2012, depending on whether voters approve Proposition 1A, also known as the Budget Stabilization Act, in a statewide election May 19. As of Wednesday, the sales tax will range from 8.25% to 10.25% depending on additional local taxes.
Also part of the budget-balancing package approved by lawmakers in February was a boost in vehicle license fees starting in May.
The sales tax hike is expected to bring added revenue to the state, but with the economy deep in a recession and consumers reluctant to spend, the move could be less effective than planned, said economist Sung Won Sohn, a professor at Cal State Channel Islands.
