Back-to-school sales tax holiday, tax break on tips will be in NC House budget
The theme of North Carolina House Republicans’ budget so far has been cuts: saving millions of dollars by cutting vacant state employee jobs, as well as ending or scaling back some programs. While the full budget won’t be made public until Monday, House Speaker Destin Hall announced more cuts on Friday.
Tax cuts.
While the House budget writers’ full plan on tax policy isn’t clear yet, two proposed tax cuts are aimed at helping working families.
First, the sales tax holiday, which had been an August weekend that gave back-to-school shoppers a tax break.
Also, a tax break on tips.
Here’s their pitch.
Restore sales tax holiday
House Republicans are proposing restoring the sales tax holiday on an August weekend starting in 2026. That would mean no state sales tax on school supplies, clothes and other related items, “reducing the financial burden on parents and students.”
North Carolina had such a tax break from 2002 to 2013, The News & Observer previously reported. Critics pointed to lost tax revenue — for example, an estimated $13.6 million in 2012, The Charlotte Observer reported. Republicans eliminated it as part of a tax overhaul that also reduced corporate and personal income taxes.
Democratic Gov. Josh Stein included restoration of the sales tax holiday in his budget proposal to the General Assembly in February.
The cost of the sales tax holiday would be $29 million the first year and $30 the second year, The News & Observer previously reported.
The move has support from the NC Retail Merchants Association, with President Andy Ellen calling it a “win for both North Carolina’s hard-working families and retailers.”
Ellen said the sales tax holiday would bring shoppers back to North Carolina who use the tax holiday in neighboring states Virginia, Tennessee and South Carolina.
Tax break on tips
The House budget would also make the first $5,000 of tips earned exempt from the state income tax.
“We appreciate the House’s measured ‘no tax on tips’ policy, which ensures that more of what service industry workers earn stays in their pockets. This provision recognizes the hard work and dedication of North Carolina’s hospitality professionals and provides meaningful relief to those who count on tips to make ends meet,” Lynn Minges, president and CEO of the North Carolina Restaurant & Lodging Association, said in a statement.
No taxes on tips is also a policy being pushed by President Donald Trump and other Republicans.
What’s next for the budget
The House rolled out much of its budget in committees on Thursday, saving the big ticket items like taxes and raises for later. After the entire budget bill comes out Monday, it will be heard in committees on Tuesday and go to the floor for votes on Wednesday and Thursday.
After that, the House will negotiate with the Senate, which is also Republican-controlled and passed its budget last month, on a final bill. Then the final version of the budget is sent to Stein’s desk for action.
This story was originally published May 16, 2025 at 3:45 PM with the headline "Back-to-school sales tax holiday, tax break on tips will be in NC House budget."
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