It’s back-to-school shopping time, and your friends in nearby states may be gearing up to buy computers, clothing and school supplies free of sales tax this weekend.
You wonder whether North Carolina will have its own tax-free holiday weekend?
Sorry to disappoint you.
North Carolina did have a sales-tax holiday shopping weekend from 2002 until 2013, when the state Legislature under then-Gov. Pat McCrory ended the program as part of a reform package that lowered personal and corporate income taxes in the state.
What was it?
The three-day tax-free holiday was held the first weekend in August to give families a break on the cost of clothing, shoes, sports gear, computers, school supplies and other items. Teachers also used the tax-free weekend to buy supplies for their classrooms.
Many retailers said the sales tax-free weekend was their second-biggest shopping weekend of the year, behind Black Friday.
Why was it ended?
According to the tax policy nonprofit Tax Foundation, which considers tax holidays political gimmicks that distract from potentially more useful tax relief, the number of states holding the holidays peaked at 19 in 2010. In 2017, the group said, 16 states conducted sales tax holidays.
The foundation says that studies by the Federal Reserve show the holidays do not promote economic growth or significantly increase consumer purchases; they just prompt shoppers to buy at a different time. The group says some retailers even raise prices during tax-free holidays, offsetting the savings consumers would enjoy.
When they eliminated the holiday, N.C. lawmakers said the state had lost more than $13 million in revenue from the tax-free weekend in 2013, the last year it was conducted. Some chamber of commerce leaders in the state said another way to look at that figure was that consumers saved $13 million that year.
Several bills have been introduced since 2013 to reinstate the holiday but none has gained traction.
What about online shopping?
Until this year, companies with large internet sales have been able to avoid collecting sales taxes in states where they do not have a large presence, giving them an advantage over brick-and-mortar stores in those states. North Carolina lost more than $400 million a year in taxes on such sales, the state said.
But under a U.S. Supreme Court ruling announced in June, North Carolina could begin collecting sales taxes on internet sales. Lawmakers have not yet established procedures for charging the taxes, but one proposal is that any seller with annual gross sales of more than $100,000 in sales or with 200 or more separate sales in the state a year would be required to collect N.C. sales tax.
What neighboring states still hold tax free holidays?
Georgia no longer has a sales tax holiday. Tennessee held its tax-free weekend July 27-29.
Virginia and South Carolina will hold theirs starting at 12:01 a.m. Friday, Aug. 3, and ending at 11:59 p.m. Sunday, Aug. 5. Items eligible for tax-free purchase may vary by state.
What is the sales tax rate in North Carolina?
It varies by location; the state sales tax is 4.75 percent, and counties collect additional sales taxes. In Wake County, according to a table from the state Department of Revenue, the total sales tax is 7.25 percent. In Durham and Orange counties, it’s 7.5 percent, and in Johnston County it’s 6.75 percent.