Quick Tax Quiz: When and Where Did the Sales Tax Holiday Trend Start?
The correct answer is E) Ohio and Michigan offered sales tax holidays for automobile purchases in 1980.
Ohio and Michigan enacted the first sales tax holidays in 1980 when they offered tax holidays for automobile purchases, and New York sparked the modern trend, with the first sales tax holiday for clothing in 1997. New York’s objective was to tackle border shopping, the phenomenon of residents traveling to nearby states to take advantage of lower sales tax rates (particularly clothing purchases in New Jersey).
For more on sales tax holidays, see the Tax Foundation Special Report “Sales Tax Holidays: Politically Expedient but Poor Tax Policy” (PDF).