Lawmakers in many states have enacted “sales tax holidays” to temporarily suspend the tax on purchases of clothing, school supplies, and other items. These temporary exemptions 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 to arbitrarily reward people with specific hobbies or in certain professions.
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.
The most notable expansion of sales tax holidays comes from Florida, where lawmakers have made the sales tax exemption for diapers and baby clothes permanent and opted to create new categories of sales tax holidays to the tune of more than $1 billion in lost revenue. This revenue loss is challenging for a state that already has no income tax and an extremely regressive tax code.
Below are the states with sales tax holidays on the books for 2023. Seven states only have back-to-school sales tax holidays, while the other 12 states have a variety of exemptions. Read more about these exemptions and the effects of these policy decisions in our sales tax holiday brief.