||The examples and perspective in this article may not represent a worldwide view of the subject. (December 2010)|
A tax holiday is a temporary reduction or elimination of a tax. Programs may be referred to as tax abatements, tax subsidies, tax holidays, or tax reduction programs. Governments usually create tax holidays as incentives for business investment. Tax holidays have been granted by governments at national, sub-national, and local levels, and have included income, property, sales, VAT, and other taxes. Some tax holidays are extra-statutory concessions, where governing bodies grant reduction in tax not necessarily authorized within the law. In developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting Foreign Direct Investment or stimulating growth in selected industries.
Tax holidays stimulate community revitalization, retain City residents, attract homeowners to the City, and to reduce development costs for home-ownership and rental projects. The program provides a benefit for residents who improve their homes and encourages home shoppers to buy in the City. The tax abatement benefits stay with the property the entire length of the abatement and will transfer to any new property owner within that period.
A tax holiday may be given in respect of particular activities, in particular areas with a view to develop that area of business, or to particular taxpayers. Researchers found that on sales tax holidays, households increase the number of clothing and shoes bought by over 49 percent and 45 percent, respectively, relative to what they buy on average.
Sales tax holidays in the United States
In New York, a statewide sales tax holiday was first enacted by the New York Legislature in 1996 and enabled the first tax-free week in January 1997. Local governments in New York were given the option of whether or not to participate; most declined. Since then, the initiative has been adopted by thirteen states. It commonly takes place as a form of tax-free weekend lasting Friday through Sunday, usually during a major shopping period for necessities, such as just before school starts. During that period, sales tax is not collected on selected items, such as clothing and school supplies. The items subject to the sales tax exemption may also be restricted by price (for example, clothing up to $100), but consumers are free to buy unlimited quantity of items.
As with other sales taxes, visiting residents of non-participating states who purchase tax-free goods (holiday or not) may still have to pay "use tax" on their goods that they take home.
|State (Or Capital)||Items Included||Period||Days|
|Alabama||clothing, computers, school supplies, books||1st weekend in August||3|
|Arkansas ||clothing, school supplies, books||1st weekend in August||2|
|Connecticut||clothing||3rd week in August||7|
|District of Columbia ||Repealed|
|Florida||clothing, school supplies, books||2nd week in August||3|
|Georgia||clothing, school supplies, computers||1st weekend of August||4|
|Iowa||clothing||1st weekend of August||2|
|Louisiana ||all TPP - $2,500, hurricane preparedness items - $1,500, firearms, ammunition and hunting supplies||1st weekend of September||2|
|Massachusetts||school supplies, computers, sports equipment, health & beauty aid||2nd weekend of August||2|
|Maryland ||clothing & footwear||August 14–20||7|
|Energy star products||Feb. 19-21, 2011||3|
|Missouri||clothing, school supplies, computers||1st weekend in August||3|
|New Mexico||clothing, school supplies, computers||1st weekend of August||3|
|North Carolina||clothing, school supplies, computers, sport equipment||1st weekend of August||3|
|Oklahoma||clothing||1st weekend of August||3|
|South Carolina||clothing, school supplies, computers||1st weekend of August||3|
|Tennessee||clothing, school supplies, computers||1st weekend of August||3|
|Texas||clothing, diapers, backpacks, school supplies||3rd weekend of August||3|
|Virginia||clothing, school supplies, green appliances, hurricane preparedness items||May, August, October||3|
Five states in the U.S. (Alaska, Delaware, Montana, New Hampshire and Oregon) do not impose general sales taxes at all but may have specific excise taxes on gasoline, cigarettes, alcohol, meals, etc. See Sales taxes in the United States for details.
Some governments create tax free weekends as incentives for business investment.
- For example, Indonesian tax holidays for certain investments.
- For example, New Jersey's Urban Enterprise Zones.
- For example, New York City property tax reduction programs.
- Federal Reserve Bank of Chicago, The Effect of Sales Tax Holidays on Household Consumption Patterns, July 2010
- "Sales Tax Holiday Announced for Massachusetts". Retrieved 2007-08-11.
- "Shop Maryland- the state's tax free week". Retrieved 2011-08-08.
- "Back to School Sales Tax Holiday". MO.gov Website. Retrieved 31 July 2011.
- "Sales Tax Holiday (Sales Tax Holiday 98-490)". Texas Comptroller of Public Accounts. Retrieved 2007-08-18.
- 2008 State Sales Tax Holidays - Federation of Tax Administrators
- District of Columbia
- New Mexico
- North Carolina
- South Carolina
- West Virginia
- Sales Tax Holiday
- Tax Free Weekend