The State of North Carolina has a state-wide sales tax that affects a number of purchases within the borders of the state as well as additional local taxes that apply in certain cities and counties within the state.
In this guide we will review the items on which sales tax applies in North Carolina, how nexus is established for those who do business in the state, and the process for acquiring a permit to collect sales tax and subsequently collecting that sales tax each reporting period.
The following rates apply at the state and city level:
Because each county and city charges a slightly different sales tax rate in North Carolina, it is recommended you use a sales tax calculator to determine the rate that will apply for your municipality.
If you operate your business solely in North Carolina and what you sell is subject to sales tax, then you must collect for each purchase made. However, if you live outside the state and do business in North Carolina, you’ll need to establish sales tax nexus first to determine if you must collect and remit sales tax payments to the Department of Revenue for North Carolina.
The following situations constitute sales tax nexus in North Carolina:
To learn more about establishing sales tax nexus and determining if you’ll need to collect sales tax in the state, you can visit the North Carolina Department of Revenue website here .
While there is currently no fulfillment center in North Carolina for the Amazon FBA program, there will be one opening there in the future – if you use the FBA program to fulfill your orders on Amazon, make sure you check if your goods will be stored there. If so, you may have nexus in the state.
If you’ve established that you must collect sales tax in North Carolina, the next step is to determine which items or services you sell are taxable in the state. Like many states, the bulk of services in North Carolina are not taxable. Here are some things to keep in mind when determining if you should collect tax:
It is recommended that you fully review the Department of Revenue’s G.S. § 105-164.13 to determine what exemptions apply for you if you do business in North Carolina.
Once you have established that you have sales tax nexus in North Carolina, you must register with the state to acquire a sales tax permit for collection. The state offers two different ways to register for collection of sales tax, including:
You’ll need all of your business information, including Federal Employer Identification Number and if you are located in the state, your North Carolina Secretary of State Number. The state offers a checklist for business registration including the information you will need. This list also applies to sales tax permit registration.
You will pay North Carolina sales and use tax by:
How frequently you file will be determined by the amount of sales tax owed to the state. At the time you receive your permit, North Carolina will assign you with a filing frequency, with the due dates listed below.
Quarterly: If sales tax liability is consistently less than $100 per month, filers can submit their returns every quarter on the following due dates
|January – March (Q1)||April 30|
|April – June (Q2)||July 31|
|July – September (Q3)||October 31|
|October – December (Q4)||January 31|
Monthly: For those with tax liability between $100 and $20,000 per month, filing is expected every month on the following dates:
Monthly with Prepayment: North Carolina does not offer an annual payment option. They do, however, require monthly prepayment if the tax liability is greater than $20,000 per month consistently. The prepayment must be at least 65% of the tax due for the current month or the same month from the previous year. For those that this applies to, returns must be filed and paid online. This does not apply to those who file the E-500E for utility and liquor sales tax or the E-500J for machinery and equipment sales tax.
If payment is remitted late, there is a 10% failure to pay penalty that will be due with the next payment. Interest will be charged as well from the date of the last received payment.
If payment is on time but filing is late, there is a failure to file penalty of 5% per month with a maximum fine of 25% for a single return.
For those with a zero return, filing is still required by the listed due date. There is no penalty for failing to file a zero return, but after 18 months, the permit may be revoked for lack of filing.
For those who are required to file and remit sales tax in the State of North Carolina, there are a number of factors to keep in mind. TaxTools sales tax software can help manage the destination based sales tax collection and remittance required by the state with data review and sorting features. It can work in conjunction with your current website and eCommerce setup or can be integrated into your transaction setup. If you would like to learn more, contact us today or signup here for a free trial of the TaxTools software.