A tax holiday is a temporary reduction or elimination of a tax. It is synonymous with tax abatement, tax subsidy
or tax reduction. Governments usually create tax holidays as incentives for business investment. Tax relief can be provided in the form of property tax concessions to assure the investment of new businesses or the retention of existing ones. Tax holidays have been granted by governments at national, sub-national, and local levels, and have included income, property, sales,
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity
In law, a legal ...
, and other taxes. Some tax holidays are extra-statutory concessions, where governing bodies grant a reduction in tax that is not necessarily authorized within the law. In
Example of Older Classifications by the IMF and the United Nations, UN from 2008
A developing country is a country with a less developed industrial base and a low Human Development Index (HDI) relative to other countries. However, ...
, governments sometimes reduce or eliminate
A corporate tax, also called corporation tax or company tax, is a direct tax
Though the actual definitions vary between jurisdictions, in general, a direct tax is a tax imposed upon a person or property as distinct from a tax imposed upon a tran ...
es for the purpose of attracting
foreign direct investment#REDIRECT Foreign direct investment
A foreign direct investment (FDI) is an investment in the form of a Controlling interest, controlling ownership in a business in one country by an entity based in another country. It is thus distinguished fro ...
or stimulating growth in selected industries.
A tax holiday may be granted to particular activities, in particular to develop a given area of business, or to particular taxpayers. Researchers found that on sales tax holidays, households increase the quantities of clothing and shoes bought by over 49% and 45%, 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, enabling 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 the 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 (e.g., clothing up to $100), but consumers are free to buy unlimited quantities of the included 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
A use tax is a type of tax levied in the United States
The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primarily located in North America. It consists ...
on the goods they take home.
Five US states (Alaska, Delaware, Montana, New Hampshire, and Oregon) do not impose general sales taxes at all but may have
file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the bung of the beer barrel so when the barrel ...
on specific categories of goods such as gasoline, E911, cigarettes, alcohol, or meals. See
Sales taxes in the United States
Sales taxes in the United States are taxes placed on the sale or lease of goods and services in the United States. Sales tax is governed at the state level and no national general sales tax exists. 45 states, the District of Columbia, the terr ...
Some governments create tax-free weekends as incentives for business investment.
2008 State Sales Tax Holidays
- Federation of Tax Administrators
Sales Tax HolidayTax Free Weekend
AlabamaConnecticutDistrict of ColumbiaGeorgiaLouisianaMissouriNew MexicoSouth CarolinaTennesseeVermontVirginiaWest Virginia