Over the next month, 15 states will temporarily exempt a range of products from sales tax, joining one that held its sales tax holiday earlier this summer and two that do so a little later in the year.
While these temporary suspensions may have some surface appeal, they have many significant downsides, as we explain in our new brief.
The brief’s key findings:
- 18 states have sales tax holidays on the books in 2025.
- These suspensions will cost states and localities nearly $1.3 billion in lost revenue this year.
- Sales tax holidays are poorly targeted and too temporary to meaningfully change the regressive nature of a state’s tax system.
- Overall, the benefits of sales tax holidays are minimal while their downsides are significant.
“Sales tax holidays are ineffective and gimmicky,” said Miles Trinidad, ITEP State Analyst and author of the brief. “While policymakers often tout them as helping families save money for essential goods, these holidays fall far short of lessening the regressive nature of sales taxes on the low- and moderate income households who feel these taxes the most while also depriving states of revenue, being easily exploitable, and creating administrative headaches.”
Key states that have changed their sales tax holiday policies in the past year:
- Louisiana legislators did not renew the state’s sales tax holiday for firearms, ammunition, and hunting supplies this year as it was scheduled to expire on June 30. But as of July 1, the state regained the ability to reinstate tax holidays for disaster prep and school supplies, after a seven-year suspension that began in 2018 to balance the budget.
- Florida legislators made the state’s back-to-school sales tax holiday permanent and extended it for the entire month of August. To offset costs of the expanded tax holiday, the state ended its recreational sales tax holiday and replaced the disaster prep holiday with a permanent exemption for certain items.
Overall, sales tax holidays are bad policies that have too often been used as a substitute for more meaningful, permanent reform. They are an inadequate substitute for several reasons:
- Tax holidays leave a regressive tax system—one that asks more of low- and moderate-income families—unchanged and do little to benefit families most in need of support.
- Sales tax holidays poorly target those who are disproportionately impacted by regressive sales taxes and wealthier families are more likely to be able to benefit.
- Retailers are given leverage during sales tax holidays and can exploit consumers with higher prices or watered-down sales promotions.
