North Carolina Sales Tax Rates

Total Range for 2024

4.75%–7.5%

north carolina department of revenue

Nexus in North Carolina

Similar to other states, North Carolina has both physical nexus and economic nexus rules to determine a business’s obligation to collect sales tax:

  • Physical Nexus: Having a physical presence in North Carolina, like an office, warehouse, or employees in the state, triggers this type. If you do, you likely need to collect sales tax.
  • Economic Nexus: This kicks in when your sales within North Carolina exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In North Carolina, the economic nexus threshold is $100,000 or more of gross sales from deliveries of tangible personal property or services to locations within North Carolina State during the previous twelve months.

Why do you need to collect sales tax in North Carolina?

Sales tax is a significant source of revenue for North Carolina for 2 reasons:

  • Supporting Vital Government Services: Sales tax serves as a significant revenue source for both the state of North Carolina and its local governments. This revenue is essential for funding critical services such as law enforcement, firefighting, infrastructure development and maintenance, and public education. By collecting sales tax, businesses with a substantial presence (nexus) in North Carolina play a role in financing these crucial services.
  • Ensuring Fair Competition among Businesses: Sales tax collection promotes fairness among businesses operating within North Carolina. Without it, out-of-state vendors could gain an unfair advantage over local businesses by not collecting sales tax. Sales tax ensures that all businesses selling similar products or services in North Carolina contribute fairly to the state and local tax base.

Is what you’re selling taxable in North Carolina?

North Carolina applies sales tax to most tangible personal property, some specified digital products, and certain services. Here’s a breakdown to help you determine if your product or service is taxable:

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How to Register for Sales Tax in North Carolina

If you’ve determined you need to collect sales tax in North Carolina, registering for a Certificate of Registration is the next step. Here’s how you can do it:

  1. Online Registration:

The North Carolina Department of Revenue (NCDOR) offers a convenient online registration system through their website. This is generally the fastest and most efficient way to register. Here’s what you’ll need:

  • Business name and address
  • Contact information
  • Federal Employer Identification Number (EIN)
  • Business activity start date
  • Projected monthly sales and taxable sales
  • Products or services offered
  1. Mail-in Registration:

If online registration isn’t an option, you can also register by mail using a paper application (Form EC-500).

  • Download the North Carolina Certificate of Registration application (Form EC-500) from the NCDOR website.
  • Complete the form following the instructions provided.
  • Mail the completed application form along with any required documentation to the address listed on the form.

Whichever method you choose, make sure to have all the necessary information readily available to ensure a smooth registration process.

Additional Notes:

  • You may be required to file a surety bond along with your application, depending on your business type and projected sales tax liability.
  • Once your application is approved, you’ll receive a Certificate of Registration with your sales tax permit number. You’ll need this number to collect and report sales tax.

For more detailed information and specific instructions, visit the North Carolina Department of Revenue website or contact them directly.

H2-tag: How to Collect Sales Tax in North Carolina

Once you’ve registered for a Certificate of Registration and received your sales tax permit in North Carolina, here’s what you need to know about collecting sales tax:

  1. Determine the Tax Rate:

The sales tax rate in North Carolina is a combination of a statewide base rate and potential additional local rates.  The base rate is currently 4.75%. However, many counties, cities, and special districts in North Carolina impose additional local sales taxes on top of the base rate.

You can find the specific sales tax rate for the location where your business is located or where you’re delivering goods/services by using the North Carolina Department of Revenue’s Sales and Use Tax Rate Search Tool ([invalid URL removed]).

  1. Apply the Tax Rate:

Once you know the applicable tax rate, simply add it to the taxable sales price of your goods or services to determine the amount of sales tax to collect from the customer.

  • Example: If you sell a product for $100 in a location with a combined sales tax rate of 7.25% (4.75% base rate + 2.5% local rate), the sales tax amount would be $7.25 (100 x 7.25%). You would collect $107.25 ($100 + $7.25) from the customer.
  1. Keep Good Records:

It’s crucial to maintain accurate records of your sales and sales tax collected. These records are essential for filing sales tax returns and during any potential audits by the state.

  1. Report and Remit Sales Tax:

North Carolina businesses are required to file sales tax returns and remit the collected tax on a regular basis. The specific filing frequency depends on your business’s total sales tax liability.

  • Generally, businesses with lower sales tax liability will file quarterly, while those with higher liability may need to file monthly.

You can find detailed information on sales tax filing deadlines and remittance procedures on the North Carolina Department of Revenue website or by contacting them directly.

Additional Tips:

  • Consider hiring a sales tax wingman to take care of calculations, filing, and remittance, saving you time and ensuring accuracy.
  • Stay informed: Sales tax laws and regulations can change, so stay updated on any changes that might affect your business.

FAQs

How often do you need to file sales tax returns in North Carolina?

The frequency of filing sales tax returns in North Carolina depends on your business’s total sales tax liability. The North Carolina Department of Revenue (NCDOR) categorizes filers into different filing frequencies based on their projected sales tax liability.

  • Generally:
    • Businesses with less than $100 in monthly sales tax liability will file quarterly.
    • Businesses with $100 or more but less than $20,000 in monthly sales tax liability will file monthly.
    • Businesses with $20,000 or more in monthly sales tax liability may be required to file more frequently, potentially including prepayments.
Do you need a seller/reseller permit?

In North Carolina, a seller’s permit is called a Certificate of Registration. Yes, you’ll need to register for a Certificate of Registration to collect sales tax in North Carolina. You can find instructions on registering for a Certificate of Registration in the “How to Register for Sales Tax in North Carolina” section above.

When are North Carolina's Returns Due?

Sales tax return deadlines in North Carolina depend on your filing frequency (monthly or quarterly) and the month your registration became effective.

  • You can find a detailed breakdown of filing deadlines based on your filing frequency and registration month on the NCDOR website.
Are there any exceptions to the sales tax on digital products?

There are limited exceptions for certain digital products in North Carolina. Here’s a quick breakdown:

  • Taxable: Downloaded digital products like ebooks, audiobooks, and music downloads purchased for personal use are subject to sales tax in North Carolina.
  • Non-Taxable: Certain services related to digital products, like separately charged subscriptions to streaming services or online gaming platforms, may not be taxable.

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