They have been utilized both independently and in conjunction with other tax incentives, usually as part of a larger economic development effort, such The Vermont Legislative Research Shop Tax Reduction Incentives for Businesses and the Arts Tax free zones are designated areas in which specified businesses are exempt from state sales tax. They have been utilized both independently and in conjunction with other tax incentives, usually as part of a larger economic development effort, such as enterprise zones. Enterprise Zones Enterprise zones combine a variety of tax incentives and government programs to stimulate growth in depressed areas. They vary greatly, consisting of various incentive combinations, depending upon the location and aim. Some seek to attract new businesses and industry to an area, others to aid existing establishments.
Studies regarding the effectiveness of enterprise zones are inconclusive.
The basic state and local tax system is a larger determinant of new businesses' success. Often the incentives offered are not enough to counteract the disadvantages inherent in the area, notably location. In Rhode Island tax free zones have been established to promote the growth of arts districts. The cities of Pawtucket and Westerley have implemented zones that allow artists who live and sell their work within the district an exemption on the state sales tax. Local politicians are hoping the incentives will attract artists to the area, which in turn will generate tourism.