Sales Taxes
What States Have Sales Tax Holidays in 2023?
• By ITEP Staff
The number of states with sales tax holidays on the books fell to 19 in 2023 from 20 in 2022. Yet even as slightly fewer states have them, they are estimated to cost much more. In 2023, sales tax holidays will cost states and localities nearly $1.6 billion in lost revenue, up from an estimated $1 billion just a year ago.
A Lot for A Little: Gimmicky Sales Tax Holidays Are an Ineffective Substitute for Real Sales Tax Reform
• By Marco Guzman
This year, 19 states will forgo a combined $1.6 billion in tax revenue on sales tax holidays—politically popular, yet ultimately ineffective gimmicks with minimal benefits and significant downsides.
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
• By Marco Guzman
Nineteen states have sales tax holidays on the books in 2023, and these suspensions will cost nearly $1.6 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.
“Fair Tax” Plan Would Abolish the IRS and Shift Federal Taxes from the Wealthy to the Rest of Us
• By Steve Wamhoff
The "Fair Tax" bill would impose a 30 percent federal sales tax on everything we buy – groceries, cars, homes, health care - and lead to a giant tax shift from the well-off to everyone else.
Gimmicky Sales Tax Holidays Are Short-Term and Ineffective
• By Marco Guzman
Everyone loves a deal, so it’s no surprise why the appeal of the state sales tax holiday continues to persist. This year, 20 states will forgo more than $1 billion in combined revenue to enact a variety of sales tax holidays that—like most things that are too good to be true—will do little to provide meaningful benefits and instead undermine funding for public services.
New ITEP Brief Shows How State Sales Tax Holidays Fail to Live Up to the Hype
• By Marco Guzman
Twenty states this year have decided to go so far as to forgo a combined $1 billion in vital tax revenue in favor of conveniently popular yet ultimately ineffective sales tax holidays. Whether it’s a state looking for a way to help families manage the rising cost of goods or to celebrate back-to-school shopping season, these policy options are poorly targeted and an inadequate use of state tax revenue that could be doing more to…
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
• By Marco Guzman
Lawmakers in many states have enacted “sales tax holidays” (20 states will hold them in 2022) to temporarily suspend the tax on purchases of clothing, school supplies, and other items. These holidays may seem to lessen the regressive impacts of the sales tax, but their benefits are minimal while their downsides are significant—particularly as lawmakers have sought to apply the concept as a substitute for more meaningful, permanent reform or arbitrarily reward people with specific…
State Experimentation with Sales Tax Holidays Magnifies Their Flaws
• By Dylan Grundman O'Neill
It’s back-to-school shopping season, so…everyone who buys a cell phone in Arkansas this weekend will do so sales-tax-free. For this whole week in Connecticut, and for the entire spring in New Mexico, the corporate owners of highly profitable multinational restaurant chains had the option to pocket their customers’ taxes rather than remit them to the state to fund vital public services, pass along those savings to their customers, or give a much-needed boost to their…
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
• By Dylan Grundman O'Neill
Policymakers tout sales tax holidays as a way for families to save money while shopping for “essential” goods. On the surface, this sounds good. However, a two- to three-day sales tax holiday for selected items does nothing to reduce taxes for low- and moderate-income taxpayers during the other 362 days of the year. Sales taxes are inherently regressive. In the long run, sales tax holidays leave a regressive tax system unchanged, and the benefits of…
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
• By Dylan Grundman O'Neill
Lawmakers in many states have enacted “sales tax holidays” (16 states will hold them in 2020) to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. These holidays may seem to lessen the regressive impacts of the sales tax, but their benefits are minimal while their downsides are significant—and amplified in the context of the COVID-19 pandemic. This policy brief looks at sales tax holidays as a…
Sales Tax Policy in a Pandemic: Exemptions for Digital Goods and Services Are More Outdated Than Ever
• By Estefan Hernandez Escoto
Many states are making the decline in sales tax collection worse by failing to apply their sales taxes to digital goods (such as downloads of music, movies, or software) and services (such as digital streaming). A state that taxes movie theater tickets but not digital streaming, for instance, is needlessly hastening the decline of its own sales tax.
Sales Taxes and Social Distancing: State and Local Governments May Face Their Steepest Sales Tax Decline Ever
• By Carl Davis, ITEP Staff, Meg Wiehe
One pressing question is what will an economic downturn in which consumers are anxious, facing job loss, or simply spending their time sheltering in place and not spending money in typical ways, mean for states’ ability to raise revenue?
Talking Taxes in Alaska
• By Carl Davis
Alaska’s tax system underwent major changes in the 1970s when oil was found at Prudhoe Bay. Lawmakers repealed the state’s personal income tax (making Alaska the only state ever to do so) and began balancing the state’s budget primarily with oil tax and royalty revenue instead. But as oil prices and production levels have declined, a yawning gap has opened between state revenues and the cost of providing vital public services.
Trends We’re Watching in 2020
• By ITEP Staff
State lawmakers have plenty to keep them busy on the tax policy front in 2020. Encouraging trends we’re watching this year include opportunities to enact and enhance refundable tax credits and increase the tax contributions of high-income households, each of which would improve tax equity and help to reduce income inequality.
A Lump of Coal for 12 States Not Collecting Marketplace Sales Taxes this Holiday Season
• By Carl Davis
The last few years have brought major improvements in how states enforce their sales tax laws on purchases made over the Internet. Less than a decade ago, e-retailers almost never collected the sales taxes owed by their customers. The result was a multi-billion dollar drain on state coffers and a competitive disadvantage for local businesses. But this holiday season looks a bit different.
Maine Reaches Tax Fairness Milestone
• By Guest Blogger
Lawmakers in Maine this year took bold steps toward making the state’s tax system fairer. Their actions demonstrate that political will can dramatically alter state tax policy landscape to improve economic well-being for low-income families while also ensuring the wealthy pay a fairer share.
State Tax Codes as Poverty Fighting Tools: 2019 Update on Four Key Policies in All 50 States
• By Aidan Davis
This report presents a comprehensive overview of anti-poverty tax policies, surveys tax policy decisions made in the states in 2019 and offers recommendations that every state should consider to help families rise out of poverty. States can jump start their anti-poverty efforts by enacting one or more of four proven and effective tax strategies to reduce the share of taxes paid by low- and moderate-income families: state Earned Income Tax Credits, property tax circuit breakers,…
Options for a Less Regressive Sales Tax in 2019
• By Aidan Davis
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax…
How Do State Tax Sales of Over-the-Counter Medication?
• By ITEP Staff
While most states levy general sales taxes on items that consumers purchase every day, those taxes often contain carveouts for some necessities such as rent, groceries, and medicine. Prescription drugs, for instance, are currently exempt from state sales tax in 44 of the 45 states levying such taxes (Illinois is the only exception, charging a […]
Follow the Money to See How Sales Tax Holidays Are Poor Policy
• By Dylan Grundman O'Neill
Sales tax holidays are wasteful, misguided policies that will drain more than $300 million of funding away from shared priorities like schools, roads, and health care this year in 16 states, while delivering little benefit to the families that could most use the help. Our newly updated brief reviews recent developments in sales tax holiday policy—including how online sales taxes are changing the picture—and explains why they are a misguided policy option for states. And…
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
• By Dylan Grundman O'Neill
Lawmakers in many states have enacted “sales tax holidays” (16 states will hold them in 2019), to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. While these holidays may seem to lessen the regressive impacts of the sales tax, their benefits are minimal. This policy brief looks at sales tax holidays as a tax reduction device.
Gaps in Sales Tax Collection Linger at Amazon.com and Among Other E-Retailers
• By Carl Davis
The last few years have brought big changes to sales tax collection for purchases made at Amazon.com and other e-retail websites. As recently as 2011, Amazon was only collecting sales tax on its direct sales in five states – a fact that gave the company a competitive edge over brick and mortar stores during a critical time in its growth. Today, Amazon is collecting state-level sales taxes on all its direct sales, but it still…
How Heavily Does Your State Rely on Sales Taxes?
• By ITEP Staff
Consumption taxes (including general sales taxes, excise taxes on specific products, and gross receipts taxes) are an important revenue source for state and local governments. While five states lack state-level general sales taxes (Alaska, Delaware, Montana, New Hampshire, and Oregon), every state levies taxes on some types of consumption.
Supreme Court Decision in Wayfair Is a Leap Forward for Sales Tax Modernization
• By Carl Davis
For years, state and local governments have been dealing with a tax enforcement nightmare as out-of-state Internet retailers have refused to collect sales tax. That non-collection was facilitated by a Supreme Court precedent that tax collection can only be required when a retailer has a “physical presence” inside of a state. In today’s ruling in […]
Under Pressure, Trump Organization Abandons Risky Sales Tax Avoidance Strategy in New York. Will It Face Penalties for Taxes it Did Not Collect?
• By Carl Davis
While President Trump was busy publicly shaming Amazon for failing to collect some state and local sales taxes, his own business’s online store was not only failing to collect the same taxes, but was arguably more aggressive than Amazon in refusing to do so. As of last month, TrumpStore.com was not even collecting sales tax in New York State despite having a “flagship retail store” inside Trump Tower, in Manhattan. As ITEP pointed out at…
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