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North Carolina Sales Tax Guide

By Cristina Garza

 

North Carolina is a treasured coastal state with a bountiful geographic expanse including some of the most beautiful beaches in the country. Many American innovations were created within the state’s lines. The biggest and most historic would probably be manned flight! But don’t discount Pepsi or Krispy Kreme, both of which originally hail from North Carolina. With the oldest state university in America and multiple thriving industries, the state has much to offer. If you’re one of the many small business owners proud to call North Carolina home, you’ll obviously need to be sure your business complies with North Carolina's sales tax laws. Fret not y’all! We have assembled this all-in-one guide for sales tax so that you can meet the sales tax compliance requirements for a small business in North Carolina. 

 

After reading this guide, you will have learned:

  • How to be prepared for your call with the North Carolina Department of Taxation.
  • How to contact the North Carolina Department of Taxation.
  • When to charge sales tax in North Carolina.
  • What goods, products, and services are taxable in North Carolina.
  • When you establish a sales tax nexus with the state of North Carolina, and the nuances of various thresholds.
  • How to register for a sales tax license in North Carolina.
  • How to collect sales tax in North Carolina.
  • How to file and pay sales tax in North Carolina.

If, after reading, you still have any questions to help you determine your tax sales obligations in North Carolina and how to fulfill them, we are here for your small business bookkeeping needs! 

 

 


North Carolina Sales Tax Contacts

North Carolina Sales Tax Contacts

 

✅  Do you need to get in touch with the North Carolina Department of Taxation?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The North Carolina Department of Taxation is reachable by phone at 877-252-3052. 

You can also visit one of their service centers, but they don’t have any way to send an email or message. If you are hoping for the fastest response, our suggestion is that you call rather than visit in person. 

When you do call the North Carolina Department of Taxation, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you plan on having a third party contact the NJ DOT on your behalf, you’ll want to be sure to have completed a power of attorney form (gen-58, PDF). If you don’t have a completed form they won’t be able to assist someone else on your behalf.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 


North Carolina Sales Tax Registration

North Carolina Sales Tax Registration

 

Are you a new business selling tangible property in North Carolina? If yes, you are going to want to register your business with the North Carolina Department of Taxation so that you can pay your sales tax on time. 

You need not fret as this is a relatively simple process and one for which you’re about to be fully prepared. We are going to outline the steps below so you are totally ready to register for your sales tax license.

Here we go! Remember...

Preparation is key. 

Let’s get started!

 

 

How do I register to collect sales tax in North Carolina?

You can apply or register for a North Carolina sales tax permit by visiting the North Carolina Online Business Registration website and following the instructions provided.

North Carolina also has an old school paper based form (PDF) you can print and mail in, but this is going to be a slower setup and with greater possibility for errors. We don’t recommend it but we wanted to make the option available in case it suits the needs of someone out there. 

 

 

What information do I need to register for a North Carolina sales tax permit?

Great question!

Before you sign up for North Carolina sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type 
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities 
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)
  • List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the North Carolina Online Business Registration website

 

 

How much does it cost to register for a North Carolina sales tax permit?

Nothing! :] The state of North Carolina doesn’t charge a single penny to register for a new sales tax permit.

 

 

Do I need a Federal Tax ID Number or EIN to register for a North Carolina sales tax permit?

Quite right, yes! You will absolutely need one, but if you don’t already have one and need to get a new EIN, it’s a painless process. You can register for a Federal EIN right here :). 

 

 

Which agencies in North Carolina do I need to additionally register with?

You may need to check with some of the following agencies or resources: 

You’ll want to give this some thought and do a little research or investigating; since every business is unique, and there are such different rules, regulations, and laws that may apply. 

We suggest contacting the North Carolina Department of Taxation to verify which additional government agencies you may be required to register with. 

 

*****

 

Huzzah!!!

You are now prepared to register for your North Carolina sales tax permit in North Carolina. 

Let’s summarize what we have covered:  

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for a North Carolina sales tax permit.
  • Register online at the North Carolina Online Business Registration website website.
  • Look into what other agencies you may have to additionally register with.

Registering for your North Carolina sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

 

 


North Carolina Sales Tax FAQ

North Carolina Sales Tax FAQ 

By now, you may have already contacted the North Carolina Department of Taxation and applied for a North Carolina sales tax permit. 

Once you have a license to collect and remit sales taxes in North Carolina, you will probably be asking yourself two questions: 

  • When do I charge a sales tax in North Carolina?
  • What goods and services are subject to sales taxes in North Carolina? 

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

 

 

What goods and services are considered taxable in North Carolina?

The following items are all taxable in the state of North Carolina: 

  • Sales of tangible goods at retail.
  • Repairs or alterations of tangible personal property.
  • Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
  • Selling service warranty contracts.
  • Short-term rentals for living accommodations (e.g. motel/hotel, beach houses, condos, timeshares, vacation homes, or RV homes).
  • Rental/lease of personal goods (e.g.: machinery, vehicles, equipment, or other property).
  • Charges for admission to any place of amusement, sport, or recreation.
  • Manufacturing or producing goods for retail sales.
  • Operating vending machines or amusement rides.
  • Services are mostly exempted (janitorial and transportation services are exempt)

 

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods, and some taxable services.

 

*****

 

Let’s now review some of our clients’ frequently asked questions:

  • Is North Carolina an Origin or Destination sales tax State?
  • What creates a sales tax nexus in North Carolina?
  • What is the economic threshold in North Carolina?
  • Does Amazon have fulfillment centers in North Carolina?
  • Does North Carolina have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions. 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

 

 

Is North Carolina an origin or destination-based sales tax state?

North Carolina is a destination sales tax state. This means you’ll want to charge sales tax based on the location of the purchaser vs. the location of the business. This is usually simply a matter of a setting to configure in a POS system. North Carolina does have a number of transit and county surtaxes atop its typical state rate. For more information, check out the official page for current North Carolina sales tax rates.

 

 Protip: Charge the customer sales tax based on their location.

 

What creates a tax nexus with the state of North Carolina?  

Having nexus, also known as "sufficient business presence,” with North Carolina means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in North Carolina because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the North Carolina Department of Taxation even if you never step foot in North Carolina.   

So, how do you create Sales Tax Nexus in North Carolina?

 

What creates sales tax nexus?

 

A business establishes a nexus in North Carolina by:

  • having a business location in North Carolina;
  • having property stored in North Carolina;
  • employing any person in North Carolina;
  • contracting with a salesperson or other agent in North Carolina;
  • leasing equipment used in North Carolina;
  • performing services in North Carolina;
  • licensing the use of intangible property in North Carolina, or transporting property in North Carolina using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

 

 

Does Amazon have fulfillment centers in North Carolina?

None at this time!

 

This is relevant for our customers that sell on Amazon or through Amazon’s FBA program.

In such cases we can help guide a small business through this regulatory maze! We use tools like A2X and Wherestock to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance. 

 

 

Does North Carolina have economic nexus?

Yes, North Carolina now has an economic nexus law. As of November 1st, 2018 remote sellers are liable to pay sales tax beyond a certain threshold. This means that even businesses without a physical presence or traditional nexus can be required to register for, collect, and pay sales taxes.

The threshold for registering is having a cumulative gross revenue of over $100,000 to North Carolina purchasers or over 200 transactions.

For more information see the North Carolina DOR’s remote sellers page here.

 

 

Does North Carolina have click-through nexus?

Yes! This means if you’re an affiliate sales or third party marketer, you may have a tax liability even if you don’t meet nexus another way [i.e. physical location or exceeding $100k/200tx in sales]. 

 

 

Is North Carolina a streamlined sales tax state?

Yep! Since October, 2005 North Carolina has been a full member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended you use a Certified Service Provider though businesses may opt to register themselves without a CSP. Ultimately the aim of streamlined sales tax is to simplify payment to multiple different states of sales and use tax. It isn’t required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.

 

 

*****

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in North Carolina.

*****

 

 

 


Collecting Sales Tax in North Carolina

Collecting Sales Tax in North Carolina

 

By now you know if you are a business that has established a nexus with North Carolina. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their North Carolina Sales Tax obligations. 

  • How do I collect North Carolina Sales Tax?
  • Who is eligible for North Carolina Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in North Carolina?
  • What happens if I lose a North Carolina nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in North Carolina.

 

 

How do I collect North Carolina sales tax?

As we mentioned above, North Carolina is a destination-based state and as such you’ll want to tax based on the purchaser’s location. Your point-of-sale software should make this relatively simple. North Carolina does have a number of transit and county surtaxes atop its typical state rate. For more information, check out the official page for current North Carolina sales tax rates.

 

 

What are the current North Carolina sales tax rates?   

North Carolina’s state-wide sales tax rate is 4.25% at the time of this article’s writing, with various local surtaxes potentially adding to that amount. Since sales tax rates may change, we shall refer you to check out the North Carolina Department of Taxation tax rate lookup page. Any change will be reflected on that page.

It always helps to be accurate and up to date with this type of information! :) 

 

 

What is exempt from North Carolina sales tax?

What is exempt from sales tax in North Carolina?

Here is a sample list of exemptions: 

  • Purchases for resale
  • Everyday clothing items
  • Medical supplies
  • Groceries 

North Carolina does not have many exemptions beyond the standard ones, but they do offer a page with expanded detail.

 

 

Who are eligible for North Carolina sales tax exemptions?

At this point, you should know what products are exempt from sales tax in North Carolina. You also want to know who may be exempt. 

Under North Carolina law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

Note that a non-profit or contractor status doesn’t necessarily immediately confer tax exempt status. To learn more about this, click here.

 

 

What should I do if my customer is exempt from sales tax in North Carolina?

Purchasers who are tax exempt must have completed resale certificate and must present their completed exemption certificate at the time of purchase. It is then incumbent upon the seller to hold on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

Remember, you always want to collect and file a copy of the exempt certificate. Such certificates must be produced upon request in the event of an audit to justify tax-exempt sales.

 

 

What happens if I lose a North Carolina sales tax exemption certificate?

Hmm... Obviously this issue is best to be avoided! Imagine finding out you’ll be audited and discovering you cannot produce an exemption certificate for a buyer! That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care with your paperwork… which happens to be one of our specialties! :) 

 

 

Does North Carolina have a sales tax holiday?

No, unfortunately they don’t offer a single day break! :\

 

***** 

 

 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in North Carolina state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

 

Filing and Paying Sales Tax in North Carolina

Filing and Paying Sales Tax in North Carolina

 

It is time to talk about filing and paying your sales taxes in North Carolina. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is North Carolina Sales Tax due?
  • What are the North Carolina Sales Tax thresholds?
  • What if a North Carolina Sales Tax filing date falls on a weekend or holiday?
  • How do I file a North Carolina Sales Tax Return?
  • How do I correct a North Carolina Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in North Carolina?
  • If I close my business, do I need to file a final sales tax return?
  • Does the North Carolina Department of Taxation offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your North Carolina Sales Tax.

 

 

When is North Carolina sales tax due?

North Carolina sales tax payments are due based on the filing interval. Filing intervals are based on the company’s tax liability [details incoming, we promise]

The state of North Carolina requires payment by no later than the 20th of the month following the reporting period

 

 

What are the North Carolina sales tax filing interval thresholds?

The thresholds for filing intervals are based on the expected or actual tax liability owed:

 

 

Average Tax Liability Owed Monthly*

Filing interval

Less than $100

Quarterly

Between $100.01 and $20,000

Monthly

More than $20,000

Monthly pre-file [more info]

 

*anticipated if new business, actual if existing company

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of North Carolina so that you don't miss any shift in deadlines.

 

What if a North Carolina sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

 

 

How do I file a North Carolina sales tax return?

Paper: Fill out form E-500 (PDF) online and submit to the mailing address on the form.

Electronic: File online via North Carolina eservices portal and submit payment via EFT.

  

 

How do I correct a North Carolina sales tax return?

Paper: Use a copy of the original submitted form and mark AMENDED.

Electronic: Amend the return within the North Carolina eservices portal

 

 

What happens if I don’t collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big no-no! Ultimately the business will be held liable for the due tax. Always be sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful. 

 

 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them. 

 

 

What happens if I file or pay my sales tax return late?

North Carolina's Department of Taxation charges a penalty for late filing ranging from 5% to 25% of the tax owed, depending on how late. The penalty for late payment is 10% plus interest on any ongoing late balance.

 

 

Do I need to file a return if I don’t collect any sales tax in North Carolina?

Yes indeedy! North Carolina requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period.

 

 

If I close my business, do I need to file a final sales tax return?

Yes, North Carolina requires businesses to file a “Final sales tax” return when closing their doors.

 

 

Does the North Carolina Department of Taxation offer a discount for filing on time?

Negative, ghost rider, the pattern is full. No discounts on early filing, unfortunately :( 

 

 

*****

 

 

Now that we have covered all our bases for filing and paying sales taxes in the state of North Carolina, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of North Carolina.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final sales tax report” when you close your business.

 

Now, you are ready to file and pay your sales tax in North Carolina. If you have any more questions, feel free to contact us.

  

 

Click here if you think sales tax is boring. Book a meeting.

 


 

Please note: This blog is for informational purposes only and the information is accurate as of 9/13/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.