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Atax holiday is a temporary reduction or elimination of atax. It is synonymous withtax abatement,tax subsidy ortax reduction. Governments usually create tax holidays as incentives for business investment, although the arrangement has also been characterized as a form of corporate welfare that leads to a redistribution of resources away from smaller businesses and private citizens and towards monopolies and other forms of consolidated wealth.

Tax relief can be provided in the form of tax concessions to assure the investment of new businesses or the retention of existing ones.^[1] Tax holidays have been granted by governments at national, sub-national, and local levels, and have includedincome,property,sales,VAT, 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. Indeveloping countries, governments sometimes reduce or eliminatecorporate taxes for the purpose of attractingforeign direct investment or stimulating growth in selected industries.

A tax holiday may be granted to particular activities,^[2] in particular to develop a given area of business,^[3] or to particular taxpayers.^[4] 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.^[5]

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 accepted.^[6] 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 payuse tax 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 haveexcise taxes on specific categories of goods such as gasoline, E911, cigarettes, alcohol, or meals. SeeSales taxes in the United States for details.

Some governments create tax-free weekends as incentives for business investment.

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• 2008 State Sales Tax HolidaysArchived 2020-02-14 at theWayback Machine – Federation of Tax Administrators

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