RATE OF SALES TAX:
4.75%
LOCAL & COUNTY MAXIMUM RATES:
2.75%
Table of Contents
What are the taxable goods and services?
The first step in sales tax compliance is determining if the items or services your firm offers are taxable in North Carolina.
Traditional Products and Services
Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in North Carolina.
Prescription drugs, food, and fuel are all free from sales tax.
In North Carolina, several services are subject to sales tax. Download this PDF from the North Carolina Department of Revenue website for a complete list of taxable services.
Digital Products and Services
A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.
Businesses in North Carolina are required to collect sales tax on the sale of digital products or services.
How to Register for Sales Tax in North Carolina
If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.
This enables your company to collect sales tax on behalf of the municipal and state governments.
You will need the following information to register:
If applicable, your Social Security Number (SSN) or Federal Employer Identification Number (FEIN), as well as your North Carolina Secretary of State Number (SOS).
Your company’s name, address, and phone number
If relevant, a partner or responsible person (name, title, SSN, address)
Specifics about your company (begin date, type of business, etc.)
A Resale Certificate might help you save money.
When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.
Sales Tax Collection
After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.
When computing sales tax, consider the following types of transactions:
Store Sales Shipping Within-State Sales Outside-State Sales
Retail Sales
For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.
Here’s an illustration of how this situation may look:
In Durham, North Carolina, Mary owns and operates a bookshop. Because books are taxable in North Carolina, Mary charges a flat-rate sales tax of 7.5% on all purchases. This includes North Carolina’s 4.75% sales tax, Durham’s 2.25% sales municipal tax, and Mary’s 0.5% local district tax.
Sales inside the state
North Carolina has what is known as a destination-based sales tax regime. This implies that long-distance purchases inside North Carolina are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.
Consider the following scenario:
Steve operates his own eBay electronics company from his home in Ashville, North Carolina. A buyer from Cary, North Carolina discovers Steve’s eBay website and buys a $350 set of headphones. Steve calculates the sales tax for this transaction using North Carolina’s 4.75% tax rate + 2% for Wake County’s tax rate and. The total cost is $373.63 ($23.63 sales tax) at a total sales tax rate of 6.75%.
Out-of-State Purchases
Businesses in North Carolina must only pay sales tax on out-of-state sales if they have nexus in other states.
Nexus indicates that the company has a physical presence in another state.
Common nexus types include:
A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.
Submit Your Sales Tax Return
You’re ready to submit your sales tax return now that you’ve obtained your North Carolina seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.
How to File a Claim
Businesses in North Carolina are required to file sales tax forms and make sales tax payments online.
How Frequently Should You File?
The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.
Quarterly filing: If your company receives less than $100 in sales tax each month, you should submit quarterly reports with the secretary of state’s consent.
Monthly filing: If your company receives more than $100 in sales tax every month, you must submit returns on a monthly basis.
Deadlines for Filing
The deadline for all North Carolina sales tax returns is the 30th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.
Penalties for Filing Late
North Carolina has a late filing penalty of 5% every month or partial month, with a maximum penalty of 25% of the tax recorded on the tax return.
North Carolina additionally levies a late payment penalty that is equivalent to 10% of the tax that is overdue.