Sales Tax Holidays by State, 2025

Sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.   holidays, designated periods when select goods or services are exempted from state (and sometimes local) sales taxes, continue to be politically popular among the states: 19 have held or will be holding sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.  holidays in 2025, matching the number from last year. (This total does not include the local sales tax holidayA sales tax holiday is a period of time when selected goods are exempted from state (and sometimes local) sales taxes. Such holidays have become an annual event in many states, with exemptions for such targeted products as back-to-school supplies, clothing, computers, hurricane preparedness supplies, and more. offered by one municipality in Alaska.)

They also take different forms in different places. In recent years, Iowa, Oklahoma, and West Virginia have exempted clothing during their holidays, while Maryland and Missouri have targeted energy-efficient appliances for temporary sales tax relief. Sales tax holidays are politically popular with elected officials because they offer direct discounts, whether real or perceived, to consumers in a highly visible way. Consumers often believe they’re getting a good deal. Thus, sales tax holidays remain popular despite their economic inefficiencies, unintended consequences, and frequent inability to achieve their stated goals.

Proponents of sales tax holidays claim they create economic growth by increasing retail activity within their timeframes. However, studies show that much of the increased shopping during holidays is shopping that consumers would have done at other times but moved to the holiday timeframe to take advantage of discounts. While some consumers make incidental “impulse” purchases during these holidays, those additional purchases are not enough to justify the revenue costs associated with these holidays, even if such impulse purchases are desirable. Since sales tax holidays shift the timing of demand but do little to increase its magnitude, sales tax holidays reduce state and local tax collections for little or no economic benefit.

Additionally, states often schedule sales tax holidays to exempt specified goods and services during times when demand for these goods and services is highest, such as back-to-school products in August and hurricane preparedness supplies before storm seasons. As a result, most of these revenue losses are associated with retail transactions that would have occurred without the added incentive. The prevalence of sales tax holidays is indicative of deeper structural weaknesses in state tax codes: the existence of a sales tax holiday is a tacit admission that the sales tax is overly burdensome throughout the rest of the year. If policymakers believe that suspending the sales tax for a single week, for example, can stimulate economic growth, they are implicitly acknowledging that the tax suppresses economic growth for the other 51 weeks. In this sense, the sales tax holiday is not genuine relief, but a political concession. It acknowledges flaws in the underlying tax structure while revealing a lack of will to enact meaningful, permanent reforms.

While revenue losses associated with most sales tax holidays are not particularly large, they still have to be offset by revenue generated elsewhere, which is a net negative for states’ overall economic health since other revenue sources are often more economically damaging than sales taxes. And states that can consistently cover these holidays out of surplus revenues could better utilize their excess funds on more economically efficient tax reforms, particularly rate reductions.

Proponents of sales tax holidays sometimes suggest that they encourage out-of-state consumers to travel for discounts, increasing in-state sales. Since so many states now have tax holidays, and because the holidays often apply to lower-cost items that wouldn’t justify a large detour, their effect in attracting out-of-state purchasers is doubtful. Furthermore, while compliance is undeniably low, a consumer who makes a sales-tax-free, out-of-state purchase intended to be consumed in their own state is legally obligated to pay use tax on that purchase.

Tax holidays also incentivize consumers to put off shopping for selected items. A lower-income family that waits to buy school supplies until a back-to-school sales tax holiday on the weekend before school starts—a point when many families have already finished their shopping—might have been better off if they had shopped earlier, when products are most likely to be well stocked. This is just one aspect of sales tax holidays that can inadvertently harm lower-income consumers. Because sales tax holidays induce high demand for an often narrow, predetermined set of goods during a limited timeframe, retailers often increase prices to avoid running out of stock. Though this aspect of sales tax holidays is difficult to study, some research has suggested companies can absorb up to 20 percent of the benefit of sales tax holidays through price increases, blunting their benefit for consumers with the lowest incomes. These shoppers are also the most likely to face difficulties in being able to prepare for sales tax holidays by increasing household savings or requesting time off work. If governments truly want to help low-income consumers, targeted assistance policies are better options. Better yet, policymakers could permanently ease tax burdens by trimming rates year-round—but permanent solutions tend to be deprioritized when politically easier, temporary gimmicks like sales tax holidays persist.

In addition to their inefficiencies as a vehicle for tax relief, sales tax holidays often have economically distortive structural flaws. For example, by imposing a cap on the price of goods that qualify for the sales tax holiday, consumers may be influenced to purchase a less expensive and lower quality product when they otherwise would have purchased a higher quality product that exceeds the specified price threshold. Low price caps can also disadvantage goods from small businesses whose prices may be higher.

The compliance costs associated with sales tax holidays are further damaging to small businesses. Additional short-term staffing is often necessary to handle the induced spikes in demand (which represents a concentration of purchases during a particular time period, not necessarily a desirable overall increase), and that can be harder to schedule for businesses with fewer employees. Moreover, small businesses may find it more difficult to absorb the spending slowdowns in the weeks immediately before and after sales tax holidays, as consistent revenue is more important when margins are thin. Even if overall revenue remains only slightly changed, the timing distortions can be painful. Additionally, the work required to comply with sales tax holiday provisions (e.g., determining which products qualify for exemption and changing cash register settings in accordance) can be especially difficult for small businesses, which are often unable to sustain entire teams dedicated to legal compliance.

Sales tax holiday structures vary widely from state to state, exacerbating these compliance difficulties. Beyond the differences in product lists and price caps, different states treat shipping, handling, layaway sales, and “rain check” sales differently. The difficult task of compliance must often be done on short notice, because details sometimes aren’t agreed to until just weeks before holidays are scheduled to take place.

For example, traditionally, Florida’s sales tax holidays have not recurred automatically but have been renewed (and often modified) each year, typically through the state budget. While they are often reauthorized, this is not guaranteed. For example, this year, the legislature did not include the Freedom Month sales tax holiday in the budget, which was signed just one day before the exemption for certain outdoor activity supplies would have typically begun. This kind of uncertainty and last-minute decision-making can disrupt planning for both retailers and consumers, limiting the intended economic boost, especially when shoppers are unsure whether the holiday will even occur. However, with the enactment of H.B. 7031 on June 30, Florida made permanent its back-to-school sales tax holiday for the month of August and also created permanent year-round sales tax exemptions, to take effect August 1, 2025, for some of the goods and services that were previously included in Florida’s disaster preparedness and “Freedom Summer” sales tax holidays.

For small online retailers selling into states with sales tax holidays, compliance can be a nightmare. There are legal consequences for over-collecting sales tax from consumers, so last-minute sales tax holiday legislative decisions force sellers to scramble to make sales tax determinations on an evolving range of products, and often with definitions that require careful product-by-product eligibility judgments.

Some businesses thrive on sales tax holidays while others struggle to comply with them. Some consumers benefit from them while others might be inadvertently hurt by them. Sales tax holidays pick winners and losers—and their costs aren’t offset by any meaningful economic benefit.

While most sales tax holidays impose steep compliance burdens on retailers, Nevada’s holiday, uniquely, imposes steep administrative burdens on the few Nevada residents who are eligible to take advantage of it. Specifically, Nevada offers a narrowly targeted sales tax holiday exclusively for members of the Nevada National Guard and qualifying relatives. Until 2023, eligible individuals were required to present to retailers a copy of an eligibility letter that they had applied for through their National Guard unit at least 45 days in advance of the holiday, and retailers were required to offer the exemption at the time of sale.

However, with the adoption of SB 50 in 2023, the process has been amended such that retailers no longer offer the exemption at the time of sale. Instead, to participate in the sales tax holiday, eligible individuals must request an exemption letter from their National Guard unit at least 45 days before the holiday and pay the sales tax during the holiday. After paying the sales tax during the holiday, eligible individuals must submit to the Department of Taxation a request for a refund of sales taxes paid, a copy of the letter of exemption that they received from the National Guard, and the receipt issued by the retailer indicating that they paid the tax. Only after completing this process may Nevada National Guard members and qualifying relatives receive their refund and benefit from the sales tax holiday. While the previous system was more burdensome for retailers, the new system is burdensome and inefficient for taxpayers and likely discourages many qualifying individuals from taking advantage of the exemption, especially on smaller purchases.

From a political standpoint, sales tax holidays are harmful because they create space for politicians and regulators to pick political favorites in the process of selecting eligible products. They also pave the way for lobbyists to solicit policymakers in hopes of securing a sales tax holiday for their products. Because small retail businesses often lack resources for lobbying, and because there is no way for legislators to perfectly know what consumers want, the lists of goods included in tax holidays can become an unholy matrimony of centralized economic planning and corporate lobbying. Any decision about which goods are and aren’t exempt will discriminate against some consumers.

Overall, sales tax holidays are an inefficient vehicle for providing tax relief or generating additional economic activity. They often end up hurting the taxpayers they intend to help. They inject unnecessary instability into government and business revenue streams; create administrative and compliance costs for businesses, governments, and consumers; and do not promote long-term economic growth. Several states realized these downfalls and accordingly abandoned their sales tax holidays in recent years. However, their electoral utility remains an incentive for policymakers, and with 19 states offering sales tax holidays in 2025—matching peak historic levels—it doesn’t look like they’re going away anytime soon.

For a more detailed analysis of the arguments for and against sales tax holidays, see our 2022 full-length report