Sales Tax Holidays: An Overview of Their Impact and Inefficiencies in 2024

Tax Breaks: Some States Offer Sales Tax Holidays

Sales tax holidays, designated periods when certain goods or services are exempt from state (and sometimes local) sales taxes, continue to gain popularity among U.S. states. In 2024, 19 states are set to hold these holidays, an increase from the previous year.

These tax holidays vary widely by state. For example, Florida exempts outdoor recreational equipment during the summer, while Iowa and Oklahoma focus on clothing exemptions. Politically, sales tax holidays are appealing as they offer consumers direct discounts, whether real or perceived. This visibility helps maintain their popularity, despite the economic inefficiencies and unintended consequences associated with them.

Economic Implications

Proponents argue that sales tax holidays stimulate economic growth by boosting retail activity during the designated periods. However, research indicates that much of the shopping during these holidays consists of purchases that consumers would have made at other times, simply shifted to coincide with the discounts. While there may be some incidental impulse purchases, these are often insufficient to offset the revenue losses incurred by the holidays.

Many sales tax holidays are scheduled to coincide with peak demand periods—such as back-to-school shopping in August—meaning the revenue losses primarily stem from transactions that would have occurred regardless of the tax exemption. This situation reveals deeper structural weaknesses in state tax codes, as the existence of sales tax holidays implies that the overall sales tax burden is too high throughout the year.

State-Specific Sales Tax Holidays in 2024

Here are some notable sales tax holidays by state:

Alabama Sales Tax Holidays:

• February 23–25:
• Portable generators and power cords ($1,000)
• Severe weather preparedness supplies ($60)
• July 19–21: Back to School
• Computers, software, and school supplies ($750)
• Clothing ($100 or less)
• School supplies and instructional materials ($50)
• Books ($30)

Alaska Sales Tax Holiday:

• October 1, 2023 – March 31:
• All retail sales (no cap)
• Note: Only the Skagway Borough has enacted a local sales tax holiday during this period.

Arkansas Sales Tax Holiday:

• August 3–4:
• Clothing ($100)
• Clothing accessories/cosmetics ($50)
• Electronic devices (no cap)
• School supplies (no cap)

Connecticut Sales Tax Holiday:

• August 18–24:
• Clothing and footwear ($100

Florida Sales Tax Holidays:

• July 1-31: Wide range of goods/services related to summer activities, with some admissions exempt from tax.
• January 1-14, July 29 – August 11:
• Computers ($1,500)
• Clothing ($100)
• School supplies ($50)

Iowa Sales Tax Holiday:

• August 2-3:
• Clothing ($99.99 and less)

Louisiana Sales Tax Holiday:

• September 6-8:
• Firearms, ammunition, and hunting supplies (no cap).

Maryland Sales Tax Holidays:

• February 17-19:
• Solar water heaters and ENERGY STAR products (no cap)
• August 11–17:
• Clothing and footwear ($100)

Massachusetts Sales Tax Holiday:

• August 10-11:
• Most retail items for personal consumption ($2,500 or less, with many exceptions).

Mississippi Sales Tax Holidays:

• July 12-14:
• Clothing and footwear ($100)
• School supplies ($100)
• August 3 – September 1:
• Firearms and hunting supplies (no cap).

Missouri Sales Tax Holidays:

• April 19-25:
• ENERGY STAR products ($1,500)
• August 2-4:
• Clothing ($100)

Nevada Sales Tax Holiday:

• October 25-27:
• All purchases (no cap) by Nevada National Guard members, with refund process required post-purchase.

New Mexico Sales Tax Holidays:

• August 2-4:
• Bookbags, clothing, computers, school supplies, etc.
• November 30:
• Many retail items at qualifying small businesses ($500 cap).

Ohio Sales Tax Holiday:

• July 30 – August 8:
• Most tangible retail purchases ($500 cap).

Oklahoma Sales Tax Holiday:

• August 2-4:
• Clothing and footwear ($100).

South Carolina Sales Tax Holiday:

• August 2-4:
• Clothing, school supplies, computers (no cap).

Tennessee Sales Tax Holiday:

• July 26-28:
• Clothing ($100), computers ($1,500), food ingredients (no cap).

Texas Sales Tax Holidays:

• April 27-29:
• Emergency supplies (various caps).
• August 9-11:
• Clothing and school supplies ($100).

Virginia Sales Tax Holiday:

• August 2-4:
• Clothing, ENERGY STAR products, and emergency items.

West Virginia Sales Tax Holiday:

• August 2-5:
• Clothing and footwear ($125), laptops, school supplies.



Compliance Challenges for Small Businesses

Sales tax holidays create significant compliance challenges, particularly for small businesses. The requirement to adjust to varying state regulations, product lists, and pricing caps can strain resources, especially for businesses with limited staffing. Moreover, small businesses often find it difficult to manage revenue fluctuations before and after these holidays, where consistent cash flow is critical.

The complexity of compliance increases when states schedule holidays on short notice, leaving businesses scrambling to meet evolving criteria. For example, Massachusetts announced its sales tax holiday for August without providing specific details until weeks later, creating uncertainty for retailers.

Political Considerations and Future Outlook

From a political standpoint, sales tax holidays can lead to favoritism and lobbying, as businesses may seek exemptions for their products. This dynamic often results in a mishmash of selected goods that may not reflect consumer needs. Consequently, these tax holidays can inadvertently harm the very consumers they aim to help.

Overall, sales tax holidays have proven to be an inefficient method for delivering tax relief and fostering economic growth. Despite their shortcomings, they remain politically appealing, with 19 states maintaining these holidays in 2024—a trend unlikely to reverse soon. As states grapple with the complexities and inconsistencies of sales tax holidays, a move toward more sustainable tax reforms may be necessary for long-term economic stability.