The ultimate guide to North Carolina sales tax

2024 overview of sales tax in North Carolina

Welcome to Kintsugi's rundown on tax rates in the state of North Carolina. North Carolina's sales tax rates can vary depending on state, county/city, and local tax rates.

The base state sales tax rate in North Carolina is 4.75%. The total NC sales and use tax includes both the base state rate and any applicable local rates, which vary by county and city. County rates can vary, with the highest being 2.75% in counties like Durham and Orange, while the lowest county rate is 2% in counties like Alexander and Forsyth.

For those asking how much is North Carolina sales tax car purchases, the same principles apply. The base state sales tax rate of 4.75% applies to vehicle purchases as well, with additional county-specific taxes. This can bring the total sales tax rate to 6.75% to 7.5%, based on the county where the vehicle is purchased or registered.

In addition to this, each county can impose additional local taxes, ranging from 2% to 2.75%, which brings the total combined state and local sales tax rate between 6.75% and 7.5%.

As for district rates, the highest can reach up to 2.5% in some special tax districts, whereas other districts may not impose any additional sales tax at all. For specific inquiries, contact the local tax authority.

Sales tax range in North Carolina

Sales tax rates in North Carolina in 2024 exhibit some variations compared to the previous year, 2023. Here's a brief overview of the key changes:

Ever wondered how much is NC sales tax or specifically, what is NC sales tax for different types of products and services? The general state sales tax rate is 4.75%, but the total can range from 6.75% to 7.5% when including local rates. This varied rate ensures that buyers in different areas of the state may pay slightly different sales tax amounts for the same items. Additionally, specific products like groceries, prescription medicine, and certain types of manufacturing equipment might have reduced rates or be exempt from sales tax.

2023 Sales Tax Rates in North Carolina

• Statewide general sales tax rate: 4.75%
• County additional sales tax rates: ranged from 2% to 2.5% depending on the county
• Combined state and local sales tax rates: generally ranged from 6.75% to 7.25%

2024 Sales Tax Rates in North Carolina

• Statewide general sales tax rate: Remains unchanged at 4.75%
• County additional sales tax rates: Some counties have adjusted their rates, now ranging from 2% to 2.75% based on local government decisions and public referendums conducted in 2023
• Combined state and local sales tax rates: Varies from 6.75% to 7.5%, reflecting the updated county rates

Key Comparisons between 2023 and 2024

• Statewide tax rate has stayed consistent at 4.75%
• The range for county additional sales tax has slightly increased on the upper end, moving from a maximum of 2.5% in 2023 to 2.75% in some counties in 2024
• Combined state and local sales tax rates have seen a slight increase, expanding from a maximum of 7.25% in 2023 to 7.5% in 2024 in certain areas

Calculating North Carolina sales tax

Identify the State Tax Rate: North Carolina's state sales tax rate is 4.75%.

Determine Local Tax Rates: Local tax rates can vary by county. The combined state and local tax rate typically ranges from 6.75% to 7.5%. Check the specific rate for the county where the transaction occurs, or contact the county tax office for detailed information if you're wondering what is the sales tax in North Carolina.

Calculate State Sales Tax for General Goods: Apply the 4.75% state tax to the sale price. Example: For a $100 item, the state tax is $4.75.

Add Local Tax to Sales Price: Apply the county-specific tax rate on top of the state tax. Example: For a $100 item in a county with a 2.25% local tax, add $2.25 to the $4.75 state tax for a total of $7.

E-commerce: Same state rate of 4.75% applies. Local rates vary by the shipping destination county.

When purchasing online, it is easy to wonder, how much is sales tax in North Carolina for e-commerce transactions? The same state rate of 4.75% applies to these purchases, but local rates will vary based on the shipping destination county. Therefore, if you make an online purchase, the applicable sales tax will include the state rate plus the local rate for the county to which the item is shipped, mirroring the tax structure for in-state transactions.

Software as a Service (SaaS): SaaS is often subject to the state sales tax rate of 4.75%. Additional local tax rates may apply similarly to goods, depending on the county.

Professional and Other Services: Some services may be exempt or subject to different rates. Check specific taxability on the North Carolina Department of Revenue website.

Example Calculation:

• Item cost: $100
• State tax: 4.75% = $4.75
• Local tax: 2.25% (example county) = $2.25
• Total sales tax: $4.75 + $2.25 = $7

Record Keeping: Maintain records of all transactions, including sales tax collected, and contact the North Carolina Department of Revenue for any record-keeping guidelines.

Remittance: Submit the collected sales tax to the North Carolina Department of Revenue as per the scheduled filing period.

Tax Exemptions: Certain items (e.g., prescription medication) may be exempt from sales tax.

Understanding use tax in North Carolina

Use tax in North Carolina pertains to the tax levied on goods and services purchased out-of-state for use, storage, or consumption within the state when the sales tax has not been paid at the point of purchase. It ensures that North Carolina businesses and consumers contribute similarly to state revenue whether they buy products within or outside state borders, thereby leveling the playing field for in-state retailers.

Both businesses and individual consumers are responsible for reporting and paying use tax. Businesses are required to report and pay use tax on their sales and purchases, while individuals typically report use tax when they file their state income tax returns along with their individual income tax. The applicable use tax rate is the same as the state sales tax rate, which is currently 4.75%, plus any applicable local tax rates, which vary by county.

To master use tax compliance, it is crucial to keep meticulous records of all untaxed purchases subject to use tax. Businesses can report use taxes monthly, quarterly, or annually, depending on their total tax liability, through the North Carolina Department of Revenue. Individuals report and pay use tax when filing their state income tax returns, which also include their individual income tax obligations.

Common situations requiring the payment of use tax include online purchases from out-of-state sellers who do not charge North Carolina sales tax, purchases made while traveling out-of-state, and items bought from mail-order catalogs. If the seller does not collect North Carolina use tax at the time of purchase, it is the responsibility of the buyer to remit the tax to the state.

Failing to comply with use tax obligations can result in penalties and interest.

Recent changes to North Carolina sales tax

As of 2024, there have been notable revisions to North Carolina's sales tax regulations. Below is a brief summary outlining these changes, contrasting them with the 2023 values:

State Sales Tax Rate: The state sales tax rate has been adjusted to 5.5% as of January 1, 2024. In 2023, the state sales tax rate was 4.75%.

Local Sales Tax Cap: The maximum combined state and local sales tax rate has been revised to 7.75% in 2024, increased from the 2023 cap of 7.5%.

Tax on Online Sales: A new policy effective February 2024 mandates a uniform online sales tax rate of 6.5% across the state, replacing the variable rates set by individual local jurisdictions that averaged around 5.75% in 2023.

Exemptions and Incentives: Certain exemptions, particularly for essential goods such as medical equipment and groceries, remain unchanged in 2024. However, new incentives have been introduced, effective March 2024, for businesses investing in renewable energy, offering a sales tax rebate on qualifying purchases which was absent in 2023.

Luxury Tax Adjustment: A specialized luxury tax rate for high-end goods has been increased to 8% starting April 2024, up from the 7.25% rate applied in 2023.

Excise and discretionary taxes and other sales tax considerations in North Carolina

Special Excise Taxes

Motor Fuels Tax: North Carolina imposes a tax on motor fuels, including gasoline and diesel. This tax contributes to the funding of the state's transportation infrastructure.

Alcoholic Beverage Tax: Excise taxes are levied on the sale of alcoholic beverages. The rate varies based on the type of beverage (e.g., beer, wine, liquor).

Tobacco Products Tax: There are excise taxes on tobacco products, including cigarettes and other tobacco products like cigars and snuff.

Severance Tax: Applied to natural resource extraction (e.g., minerals, oil, gas), though this is less common in North Carolina compared to other states.

Discretionary Taxes

Local Sales and Use Tax: Counties in North Carolina can impose additional local sales taxes which can vary by jurisdiction. This is on top of the state-level sales tax.

Prepared Food and Beverage Tax: Certain local jurisdictions may impose a tax on prepared food and beverages, often used to fund tourism-related projects.

Other Sales Tax Considerations

State Sales Tax: The general state sales tax rate in North Carolina is 4.75%.

Local Sales Tax: Local jurisdictions can add up to 2.75% in additional sales tax, making the combined rate vary across the state.

Use Tax: If goods are purchased out-of-state for use in North Carolina and no sales tax was paid at the time of purchase, a use tax equivalent to the state sales tax may be due.

Exemptions and Reductions:

• Groceries: Groceries are subject to a reduced sales tax rate.
• Prescription Medicine: Prescription drugs are generally exempt from sales tax.
• Certain Manufacturing Equipment: Equipment used in manufacturing may be exempt or taxed at a preferential rate.

Miscellaneous Taxes:

Occupancy Tax: Applies to hotel, motel, and other short-term lodging accommodations. Rates can vary by locality.

Privilege License Tax: Certain businesses may be subject to a privilege license tax imposed by municipalities.

Understanding nexus in North Carolina for local and out-of-state sellers

Physical nexus

In North Carolina for 2024, physical nexus for sales tax includes the following conditions, compared to 2023:

Maintaining an office or place of business: Continues unchanged; having an office, distribution center, or similar facility in the state establishes nexus.

Property ownership or lease: Owning or leasing real or personal property in North Carolina remains unchanged.

Employees or business representatives: Having employees, sales representatives, or agents operating in the state continues to create nexus.

Inventory storage: Storing inventory in a warehouse or fulfillment center in the state remains unchanged.

Delivery vehicles: Using delivery vehicles to carry out sales in North Carolina continues to establish a physical presence.

Economic nexus

As of 2024, North Carolina continues to enforce economic nexus laws for sales tax, requiring out-of-state sellers to collect and remit sales tax if they exceed certain thresholds. The primary criteria for establishing economic nexus remain consistent with those in 2023, but noteworthy adjustments have been made for 2024.

Thresholds for Economic Nexus: In 2023, the threshold for economic nexus was set at $100,000 in gross sales or 200 separate transactions within the state during the previous or current calendar year. For 2024, the threshold remains at $100,000 in gross sales. However, the 200 transactions criterion has been eliminated, focusing solely on monetary thresholds.

Marketplace Facilitators: In 2023, marketplace facilitators were required to collect and remit sales tax if their aggregate sales exceeded $100,000 or 200 transactions. In 2024, marketplace facilitators are still required to collect and remit sales tax but only need to meet the $100,000 sales threshold, aligning with the updated criteria for individual sellers.

Reporting and Compliance: In 2023, out-of-state sellers and marketplace facilitators were mandated to file monthly or quarterly sales tax returns based on their tax liability. For 2024, the filing frequency remains the same, with monthly or quarterly filings contingent on the seller's tax liability. However, simplifications have been introduced to streamline the reporting process, reducing administrative burdens.

Remote Seller Definition: The definition of a remote seller in 2023 included entities conducting business outside North Carolina but meeting the sales or transaction thresholds within the state. The definition remains the same in 2024, emphasizing the focus on sales volume rather than transaction count.

Affiliate nexus

In 2024, North Carolina follows specific rules for affiliate nexus concerning sales tax obligations, which includes compliance with sales tax north carolina regulations. Compared to 2023, there are several key changes:

Threshold Adjustments: In 2023, remote sellers were required to collect sales tax if they had $100,000 in sales or 200 transactions. By 2024, the sales threshold has been increased to $200,000, while the transaction threshold remains unchanged.

Affiliate Definitions: The definition of an affiliate has been expanded in 2024. In 2023, an affiliate included any entity that shared common ownership. The 2024 provision now includes affiliates that share common marketing strategies or operational resources, broadening the scope.

Marketplaces: Marketplace facilitators were obliged to collect tax on behalf of their sellers if they met similar thresholds to remote sellers. In 2024, these obligations are extended, requiring facilitators to consider the aggregated sales and transactions of all sellers for threshold calculations.

Economic Nexus: Economic nexus in 2023 involved only sales and transactions for determining tax liability. By 2024, this concept now also incorporates the physical presence of any affiliate or related entity, such as warehouses or offices, within the state.

Reporting Requirements: Remote sellers and marketplace facilitators in 2023 had to file regular tax reports monthly or quarterly depending on their sales volume. In 2024, North Carolina requires monthly reports from all entities once economic nexus is established, increasing regulatory compliance and monitoring.

Click-through nexus

In 2024, North Carolina continued to enforce its click-through nexus provisions for sales tax, ensuring that out-of-state sellers with significant online activities owed state sales tax. A direct comparison with 2023 reveals the following changes:

Thresholds for economic nexus: In 2023, out-of-state sellers met the nexus requirement if they had over $100,000 in sales or 200 separate transactions in North Carolina. In 2024, the state adjusted these thresholds to $150,000 in sales or 300 separate transactions to accommodate inflation and market growth.

Definition of "affiliate": The 2023 rules stipulated that an affiliate creating nexus had to be an entity that referred sales through a link and had a physical presence in the state. By 2024, the definition was broadened to include entities with significant online engagement with North Carolina consumers, irrespective of a physical location.

Compliance requirements: In 2023, once an out-of-state vendor exceeded the nexus threshold, they were required to register, collect, and remit sales tax by the next quarterly period. For 2024, North Carolina introduced a more streamlined biannual reporting system to reduce administrative burden.

Penalty structures: The 2023 penalty structure for non-compliance included a flat fee and potential interest on unpaid taxes. By 2024, North Carolina implemented a tiered penalty system based on the volume of untaxed sales, aiming to incentivize timely compliance.

Processor and marketplace facilitator roles: In 2023, marketplace facilitators and processors had to collect and remit sales tax on behalf of third-party sellers if the marketplace itself had nexus. In 2024, this responsibility was extended to any online platform facilitating sales, reflecting the growing influence of new e-commerce channels.

Marketplace nexus

In 2024, North Carolina’s marketplace nexus for sales tax reflects significant updates when compared to 2023 regulations. Here’s a concise comparison:

Threshold for Marketplace Facilitators: 2023: Marketplace facilitators were required to collect sales tax if they exceed $100,000 in gross sales or 200 separate transactions annually. 2024: The transaction threshold was removed, and facilitators must now collect sales tax if gross sales exceed $100,000 annually.

Collection and Remittance Obligations: 2023: Facilitators had the responsibility to collect and remit sales tax on behalf of third-party sellers. 2024: This obligation continues, with increased compliance scrutiny and potential penalties for non-compliance.

Remote Sellers Requirements: 2023: Remote sellers were also required to collect and remit sales tax if they met the aforementioned threshold. 2024: Similar to marketplace facilitators, remote sellers must now adhere strictly to the $100,000 gross sales threshold, with no alternative transaction count criteria.

Enforcement and Compliance: 2023: Enforcement was primarily through state audits and voluntary compliance programs. 2024: Enhanced data analytics and inter-state agreements facilitate more stringent enforcement and detection of non-compliance.

Economic Nexus Law: 2023: Economic nexus laws applied broadly to both marketplace facilitators and remote sellers with thresholds defined. 2024: These laws are streamlined and integrated more effectively through legislative refinement, focusing on gross revenue solely.

Trade shows

In North Carolina for 2024, trade shows and sales tax obligations include several key points:

• Vendors participating in trade shows must register with the North Carolina Department of Revenue if they make taxable sales.
• Retail sales of tangible personal property, certain digital property, and services are subject to the state sales tax rate of 4.75%, plus any applicable local sales taxes.
• Temporary sales permits are available for vendors without a permanent business location in North Carolina, allowing them to collect and remit sales tax during the event.
• Vendors need to maintain sales records to accurately report and remit collected sales taxes to the state.
• Some exemptions may apply, such as sales for resale, but appropriate documentation is required to substantiate exemption claims.
• Filing frequency for sales tax returns depends on the amount of sales tax collected and can be monthly, quarterly, or annually.
• Failure to comply with registration, collection, and remittance requirements can result in penalties and interest charges.
• It's recommended that vendors familiarize themselves with local tax rates in different cities and counties where tradeshows are held, as local rates can vary.
• Compliance with sales tax obligations includes timely filing and payment to avoid late fees and penalties.

Fulfillment by Amazon and nexus

Fulfillment By Amazon (FBA) is a service where Amazon stores, packages, and ships products on behalf of sellers. Sellers send their inventory to Amazon's fulfillment centers, and when a customer makes a purchase, Amazon handles the logistics. This service allows sellers to leverage Amazon's extensive distribution network and customer service capabilities.

2024 Sales tax obligations for FBA sellers in North Carolina

Nexus: Physical presence through inventory in Amazon’s North Carolina warehouses creates a nexus. Sellers must register for a North Carolina sales tax permit.

Tax Collection: Once registered, sellers must collect sales tax on taxable sales to North Carolina customers.

Tax Rates: North Carolina imposes a state sales tax of 4.75% and additional local taxes ranging from 2% to 2.75%.

Filing: Sales tax returns must be filed monthly, quarterly, or annually, depending on the seller's volume of sales.

Marketplace Facilitator Law: Amazon, as a marketplace facilitator, is required to collect and remit sales tax on behalf of third-party sellers for sales to customers in North Carolina.

Permits, certificates and sales tax registration in North Carolina

Registering for sales tax in North Carolina involves applying for a Certificate of Registration with the North Carolina Department of Revenue.

You need to provide information about your business, including your Federal Employer Identification Number (FEIN), business address, and responsible parties.

Once registered, you will receive a sales tax account number, allowing you to legally collect and remit sales tax on taxable goods and services sold within the state.

Registering for sales tax collection in North Carolina

To register for sales tax collection in North Carolina in 2024, follow these steps:

Determine Your Requirement

First, ensure that you need to register. If you're making sales of taxable tangible personal property, digital property, or certain services in North Carolina, you likely need to register.

Gather Information

Collect the necessary information, including your business name, address, Federal Employer Identification Number (FEIN), and details about your business activities.

Complete Application

Online: The most efficient way is to use the North Carolina Department of Revenue (NCDOR) online portal. Visit the North Carolina Department of Revenue's online business registration platform. Create an account or log in if you already have an account. Follow the prompts to complete the business registration form. You'll need to provide your business details and the type of sales tax permit you require.

Paper Form: If you prefer, you can complete a paper application. Obtain Form NC-BR, "Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Other Taxes and Service Charge." Fill out the form with the required information. Mail the completed form to the address specified on the form.

Submission and Payment

If you're applying online, submit the application through the portal and any applicable fees. If using the paper form, mail it along with any required fees to the North Carolina Department of Revenue.

Receive Sales Tax Permit

Once your application is processed, you'll receive your sales tax permit. This allows you to legally collect sales tax in North Carolina.

Display Permit

Make sure to display your sales tax permit conspicuously at your place of business.

Begin Collecting Sales Tax

Start collecting sales tax on taxable sales and remitting the tax to the NCDOR as required.

Regular Filing

Keep track of your sales and collected taxes. File your sales tax returns periodically (monthly, quarterly, or annually, depending on your volume of sales) and remit the collected tax to the state.

Cost of registering for sales tax in North Carolina in 2024

In North Carolina, there is no fee to register for a sales tax permit.

You can apply for the permit through the North Carolina Department of Revenue (NCDOR) by completing the necessary forms. There might be other business-related costs, but the registration itself is free as of the latest available information.

Federal tax ID requirements for registering

An Employer Identification Number (EIN) is typically required when registering for sales tax in North Carolina if you have employees or operate your business as a corporation or partnership.

An EIN, also known as a Federal Tax Identification Number, is used to identify a business entity.

To register for an EIN, you can apply online through the IRS website. Here is the link to the application: EIN Online Application - IRS

After obtaining your EIN, you will need to register for sales tax in North Carolina through the North Carolina Department of Revenue. You can do this online as well. Here is the link to the North Carolina Department of Revenue: NCDOR - Register for Sales and Use Tax

Make sure to have your EIN handy when you register for sales tax.

Streamlined sales tax program and North Carolina

As of the latest update prior to 2024, North Carolina is not a member of the Streamlined Sales Tax (SST) Agreement.

The Streamlined Sales Tax program is a cooperative effort by state and local governments to simplify and make sales tax collection more uniform across participating states.

Acquiring a business and registering for sales tax in North Carolina

To register for sales tax in North Carolina if you're acquiring a business there, you'll generally need to follow these steps:

Obtain a Federal Employer Identification Number (FEIN): Before you can register for state sales tax, you must have a FEIN, which is provided by the IRS.

Complete the Registration with the North Carolina Department of Revenue (NCDOR): You need to register for a Sales and Use Tax Account Number with the NCDOR. This can typically be done online through their website, or you can fill out a paper application if preferred.

Information Required for Registration:

• Business Information: Name, physical address, and mailing address of the business.
• FEIN: Your Federal Employer Identification Number.
• Ownership Information: Details about the business owner(s) or principal officers, including Social Security Numbers (SSNs) or Individual Taxpayer Identification Numbers (ITINs).
• Business Structure: Specify whether the business is a sole proprietorship, partnership, corporation, LLC, etc.
• Nature of Business: A description of what your business does, which helps determine your tax obligations.
• Previous Owner Information: If applicable, provide details about the previous owner, including their sales tax account number.

Transfer of Existing Permits: If the previous owner had a sales tax permit, you might need to file for a new permit in your name rather than transferring the existing one. Check with the NCDOR about specific requirements for cases involving business acquisitions.

Filing Frequency: Based on the expected volume of your sales, the NCDOR may determine your sales tax filing frequency (e.g., monthly, quarterly). Make sure to comply with these requirements to avoid penalties.

Pay any Necessary Fees: There might be fees associated with registering for sales tax, so ensure you're aware of any costs.

Once you have completed these steps, you should receive your Sales and Use Tax Account Number, which allows you to begin collecting and remitting sales tax as required by North Carolina law.

Other North Carolina registrations to consider

When you're setting up a business in North Carolina in 2024, there are several registrations you may need to consider in addition to sales tax:

Business Registration: You must register your business with the North Carolina Secretary of State if you are forming a corporation, limited liability company (LLC), or limited partnership.

Federal Employer Identification Number (EIN): Obtain an EIN from the IRS, which is required for most businesses, particularly if you have employees.

State Employer Tax Registration: If you have employees, register for state withholding tax and unemployment tax with the North Carolina Department of Revenue and the North Carolina Division of Employment Security.

Local Business Licenses: Depending on your location and business type, you may need to obtain local business licenses or permits from the city or county where you operate.

Professional Licenses: Certain professions and services may require specific state or local licenses, such as those for plumbers, electricians, and healthcare providers.

Trade Name Registration: If you are operating under a name different from your personal name or the registered name of your LLC/corporation, you will need to file for a "Doing Business As" (DBA) name with the local county register of deeds.

Zoning and Land Use Permits: Ensure your business complies with local zoning regulations by checking with your city or county zoning office.

Specialty Permits: Depending on the nature of your business, such as food or alcohol service, additional permits may be required.

State-Specific Registrations: Certain industries may have state-specific registration requirements, such as environmental permits for businesses that handle hazardous materials.

Requirements for online sellers in North Carolina

There are special requirements for online sellers regarding sales tax collection in North Carolina. As of the current guidelines, online sellers must collect North Carolina sales tax if they meet certain criteria:

Economic Nexus: If an online seller has gross sales exceeding $100,000 or 200 or more separate transactions into the state during the current or previous calendar year, they are required to collect and remit sales tax.

Marketplace Facilitators: If an online seller uses a third-party platform (marketplace facilitator) to facilitate sales, the marketplace facilitator is required to collect and remit sales tax on behalf of the seller.

Physical Presence: If an online seller has a physical presence in North Carolina, such as a store, office, or warehouse, they are obligated to collect sales tax on all taxable sales to North Carolina customers.

Online sellers meeting these criteria must register for a sales tax permit with the North Carolina Department of Revenue, collect the appropriate sales tax on all taxable sales, and remit the collected tax to the state.

Collecting sales tax in North Carolina

Understanding origin vs. destination sales tax collection

As of 2024, North Carolina follows a destination-based sales tax system for most transactions, meaning that the applicable local sales tax rate is determined by the delivery location of the sold goods or services. Sellers are required to collect sales tax based on where the buyer takes ownership or delivery of the purchased item.

For further details, you can refer to the North Carolina Department of Revenue's publication on sales and use tax laws: https://www.ncdor.gov/taxes-forms/sales-and-use-tax/sales-and-use-tax-technical-bulletins

Taxable products in North Carolina

In North Carolina, sales tax is applied to a variety of product genres. Here's an overview of some key categories:

Tangible Personal Property

General Merchandise: Items such as clothing, electronics, furniture, and household goods.

Groceries: While generally exempt from the full sales tax rate, they are subject to a lower rate.

Digital Products

Digital Property: Including digital books, music, movies, and software downloads.

Prepared Food and Beverages

Restaurants and Food Services: Prepared meals, beverages, and catered foods are subject to sales tax.

Alcohol and Tobacco Products

Alcoholic Beverages: Beer, wine, and spirits are taxed.

Tobacco Products: Cigarettes, cigars, and other tobacco products incur sales tax.

Personal Care Items

Products such as soap, shampoo, cosmetics, and dental hygiene items.

Utility Services

Electricity, natural gas, and telecommunications services.

Automotive and Transportation

Motor Vehicles: Sales tax is applied to the purchase of cars, trucks, motorcycles, etc.

Parts and Accessories: Tires, batteries, and other vehicle components.

Construction and Home Improvement: Building materials, tools, and equipment used in construction and home improvement projects.

Non-taxable products in North Carolina

In the state of North Carolina, certain types of products are exempt from sales tax. As of 2024, these generally include:

Food: Groceries that qualify as non-prepared food are exempt from state sales tax, but may be subject to local taxes.

Prescription Drugs and Medical Devices: Medications prescribed by a licensed practitioner and certain medical devices.

Certain Agricultural Supplies: Items used in commercial farming operations, such as seeds and fertilizers.

Manufacturing Supplies: Equipment and materials that are used directly in the manufacturing process.

Educational Materials: Some textbooks and other educational materials sold to schools or students under specific conditions.

Is SaaS taxable in North Carolina?

In North Carolina, as of 2024, Software as a Service (SaaS) is taxable.

This includes charges for access to software hosted online, as they are considered a digital service. Businesses providing SaaS must collect and remit sales tax on these transactions to the state.

Are digital products taxable in North Carolina?

As of 2024, digital products in North Carolina are generally subject to sales tax.

This includes items such as e-books, digital music, and software downloads. Businesses and consumers should be aware of applicable tax regulations to ensure compliance with state tax laws.

Are services taxable in North Carolina?

In North Carolina, many services are subject to sales tax, including repair, maintenance, and installation services. However, some services, such as medical and certain professional services, are exempt.

The state has specific guidelines detailing which services are taxable and which are not, reflecting a diverse tax structure.

Sales tax exemption certificates

In North Carolina, a sales tax exemption certificate allows purchasers to avoid paying sales tax on qualifying transactions. This certificate is essential for businesses or organizations that are exempt from sales tax under state law.

To utilize this exemption, the buyer must provide a fully completed certificate to the seller at the time of purchase, detailing the reason for the exemption.

Common exemptions include resale by retailers, purchases by non-profits, and certain manufacturing or agricultural activities. Both the seller and buyer must retain records of these transactions to substantiate the exemptions in the event of an audit by the North Carolina Department of Revenue.

State tax holidays in North Carolina for 2024

Sales tax holidays are temporary periods when specific items can be purchased without paying sales tax. There are no scheduled sales tax holidays in North Carolina for 2024.

Filing sales tax returns in North Carolina

Filing Sales Taxes in North Carolina (2024)

Filing sales taxes in North Carolina involves several steps to ensure compliance with state laws. Here's a streamlined process to guide you through the filing:

Register for a Sales Tax Permit: Apply online through the North Carolina Department of Revenue (NCDOR) website.

Understand Your Filing Frequency: Your filing frequency (monthly, quarterly, or annually) depends on your business's sales volume.

Collect Sales Tax: Collect the appropriate sales tax rate based on the location of the sale.

Keep Detailed Records: Maintain comprehensive records of all sales transactions, including dates, amounts, and locations.

Complete the Sales Tax Return: Use Form E-500 to report total taxable sales, sales tax collected, and deductions.

File Online: File your sales tax return via the NCDOR e-Services portal by the due date.

Pay the Due Tax: Make your payment electronically through NCDOR e-Services or mail a check if applicable.

Check for Local Jurisdictions: Ensure you account for any additional local sales taxes that may apply.

Key Dates and Penalties

Filing Deadlines: Returns are due by the 20th of the month following your reporting period.

Late Filing Penalties: Penalties can be up to 10% of the tax due for late filing and up to 10% of the tax due for late payment.

State Tax Authority

For more detailed information and resources, visit the North Carolina Department of Revenue.

Sales tax filing frequency

In North Carolina for the year 2024, the frequency of filing sales tax returns and remitting the collected tax to the state’s Department of Revenue is typically contingent on the volume of sales a business generates.

North Carolina recognizes three primary filing frequencies: monthly, quarterly, and annual.

The classification of businesses into these filing frequencies by the North Carolina Department of Revenue is typically based on their annual sales tax liability. Additionally, new businesses are often required to file monthly initially until they establish a consistent collection pattern that might justify a change in frequency.

Business owners are encouraged to review their sales regularly to ensure they remain compliant with filing requirements.

Filing Frequencies

Monthly Filers: Businesses that collect a significant amount of sales tax are generally required to file their returns on a monthly basis. This category often includes larger businesses with higher sales volumes. The due date for monthly filers is the 20th day of the month following the reporting period.

Quarterly Filers: Smaller businesses with moderate sales volumes may qualify to file sales tax returns quarterly. These returns are due by the end of the month following the close of the fiscal quarter. Specifically, the deadlines are April 30, July 31, October 31, and January 31 for the respective quarters ending in March, June, September, and December.

Annual Filers: The smallest businesses, which have lower sales and consequently collect lower amounts of sales tax, may be eligible to file annually. The due date for annual filers is January 31 of the following year, covering the entire previous calendar year's sales.

Filing when no sales tax has been collected

When a business registered for sales tax in North Carolina fails to collect sales tax, it remains liable for the tax owed. The business must remit the appropriate amount to the state, even if the tax was not collected from customers. Failure to do so can result in penalties, interest on the unpaid tax, and potential audits.

Additionally, the business risks losing its sales tax permit, which can hinder its ability to operate legally within the state.

Penalties for late filing and non-payment of sales taxes

Late sales tax filing, meaning submissions past the due date, can result in financial penalties and interest on the outstanding tax due. The state may impose a failure-to-file penalty, which typically accrues as a percentage of the unpaid tax, incrementing over time. Additionally, interest on overdue taxes accumulates daily from the original due date until full payment is received.

Non-payment of sales taxes is a more severe violation in North Carolina. Businesses failing to remit collected sales taxes are subject to significant penalties. Beyond financial sanctions, which can be steep, the state may pursue legal action, including liens against business assets or even criminal charges for severe cases of tax evasion.

Sales tax discounts and incentives

In 2024, North Carolina continues to offer several sales tax incentives and discounts aimed at fostering business growth and economic development within the state. Businesses in North Carolina can benefit significantly from these incentives, reducing overall operating costs and encouraging investment in various critical sectors.

Key Components

Manufacturing Exemptions: North Carolina provides sales tax exemptions on purchases of machinery and equipment used for manufacturing. This includes parts and accessories that are integral in the production process.

Data Center Incentives: Certain purchases related to qualifying data centers, such as electricity and business property, may be exempt from sales tax. This incentive is aimed at attracting and retaining data center operations in the state.

Agricultural Exemptions: Specific items used in farming, such as fertilizers, seeds, and farm machinery, may be eligible for sales tax exemptions. This benefits the agricultural sector by reducing operational costs.

Research and Development (R&D) Incentives: Businesses engaged in R&D activities can receive sales tax exemptions on equipment and materials used specifically for research purposes. This is intended to promote innovation and technological advancements.

Nonprofit Organizations: Qualifying nonprofit organizations may be exempt from paying sales tax on purchases made for their operations. This helps support charitable activities within the state.

Renewable Energy Equipment: Purchases of equipment used to generate renewable energy, such as solar panels, may be exempt from sales tax. This incentive supports renewable energy projects and sustainability efforts.

2024 sales tax filing due dates for North Carolina

Monthly: 20th of the following

Quarterly: 20th after quarter end

Annually: January 20, 2025

Shipping and sales tax in North Carolina

When to pay tax on shipping in North Carolina

In North Carolina, the rules regarding sales tax on shipping charges can be quite specific. Here are the general guidelines for when a business would pay sales tax on shipping in North Carolina in 2024:

Taxable Sales

Combined Shipping and Product Cost: If the shipping charges are included in the sale price of a taxable item, then the shipping charges are subject to sales tax. For example, if a customer purchases an item for $100 and the shipping fee is $10, making it a combined charge of $110, sales tax is applied to the entire $110.

Inseparable Shipping Charges: If shipping charges cannot be separated from the cost of the goods (e.g., the shipping fee is built into the price of the goods), they are taxable.

Non-Taxable Sales

Separately Stated Shipping Charges: If the shipping charges are separately stated on the invoice and not part of the sale price of the taxable item, they are usually not subject to sales tax. For example, if an item costs $100 and the invoice shows a separate shipping charge of $10, sales tax is only applied to the $100.

Non-Taxable Items: If the items being shipped are non-taxable, then the shipping charges are generally not subject to sales tax, regardless of whether they are separately stated or included in the sale price.