A sales tax holiday is a specified time period where products that would normally be taxable become exempt from sales tax. Almost 20 states offer sales tax holidays each year (the exact number of states actually depends on whether some states implement new holidays or allow existing holidays to expire).·

Sales tax holidays that apply to several products do exist, but the main idea of a tax-free period in most states is usually for one of the following reasons:·

  • School subsidies at the start of a new term (specified clothing and school supplies)·
  • Disaster preparedness (specified supplies to help taxpayers weather floods, hurricanes, and tornadoes)·
  • Carbon neutral / “Green” initiatives (specified energy-efficient products)·
  • Health, hygiene, and welfare·
  • Second Amendment (specified ammunition, guns, and hunting supplies)

The details of each tax holiday vary by state. It doesn’t really matter what products qualify for the temporary exemption, consumers always love tax-free periods since the goods they buy become cheaper. Most businesses don’t hate the holidays since they boost demand as consumers shop more, so it usually helps their sales.

However, sales tax holidays can be a pain in the backside for businesses because they have to update their systems to ensure tax isn’t charged on those sales during the tax-free period. It gets even more painful, but in some states, local governments aren’t required to participate in sales tax holidays, so retailers might be forced to exempt the state portion of the tax, but apply some local sales taxes.

Some tax exemptions during the holiday are based on value, so a product that is less than $50 might be exempt, but anything more and the tax still applies. Finally, sellers must also understand how the tax holiday impacts the taxability of shipping and other ancillary charges.

There is a lot to consider, so as always, it might be worth asking an expert to see the most practical and compliant way to deal with these holidays