Should you collect sales tax in North Carolina?
Sales tax is levied on the retail sale of tangible personal property to your customers, including leasing or renting. However, you will collect the sales tax if you determine the nexus in North Carolina. A nexus is a presence that may come physically or economically.
A physical nexus is typically created when your business has a store, warehouse, or office location in North Carolina. The economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on a revenue or some other transactional basis.
Let’s explore if your business has a Physical nexus in North Carolina.
A physical nexus is integrated when your business is engaged in the following in North Carolina:
- Servicing tangible personal property in North Carolina.
- Maintaining, occupying or using a place of business or an office in North Carolina.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name is called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- Leasing or owning any tangible personal property in the state.
- Having a stock of goods in North Carolina.
Is it constituting an Economic nexus in North Carolina?
You are required to comply with and register under sales tax rules if you are a remote seller (i.e., you don’t have a physical presence in the state) and your business sales in North Carolina exceed $100,000 during the current or previous calendar year or if you make 200 or more separate retail transactions or deliveries into the state.
You may also refer to the North Carolina Revenue Department advisory to know more about activities that may create a business nexus within the state.
How can you Register for Sales tax in North Carolina?
To get the sales tax permit, you need to apply online by visiting the North Carolina online portal. Alternatively, you can complete the licensing application using the NC-BR form and send it to their mailing address.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- EIN and Social Security numbers of all officers, partners or owners.
- Address details (physical and mailing).
- Business incorporation dates in North Carolina.
- Contact information.
- North Carolina Secretary of State Number.
- Nature of business.
Is your product or services liable to Sales tax in North Carolina?
Tangible Property: Sales tax in North Carolina is imposed primarily on the retail sale of tangible personal property, such as Furniture, giftware, toys, etc.
Services: Services are generally not subject to sales tax in North Carolina. However, there are some exclusions, such as service or labor costs, leading to the creation of tangible personal property, hotel stays, vehicle rentals, etc.
Digital Product: North Carolina charges sales tax on digital products such as software, streaming services, e-books, etc. See here for official guidance.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is non-taxable in North Carolina. Please see the North Carolina Revenue Department advisory on digital transactions and software.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. To see what exemptions are covered, please click here.
You can read further by visiting the department website to find out exactly what’s included in your list of items that must pay sales tax.
How should you collect and calculate state taxes in North Carolina?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not North Carolina-based. The sales tax is destination-based in North Carolina, which means you must collect taxes on tangible property sold to buyers based in North Carolina.
Complexities involved where you have a business nexus even if not in the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
North Carolina has a base sales tax rate of 4.75%, followed by local tax rates, which vary based on the cities and municipalities and can go up to 2.75%. Visit the sales tax rates page to learn the sales tax rates of each city or county.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectable = Sale value * (4.75% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such a sale are not subject to sales tax. However, when a sale includes both taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale, and accordingly, sales tax is applicable to the taxable portion of the sale. This link will take you to the official guidance issued by the state on shipping charges.
How should you file sales tax in North Carolina?
E-file: You can e-file and pay your taxes electronically.
File by mail: Complete form E-500 and mail to their address.
Payments are to be remitted along with filing, and they can be made through multiple modes, including ACH credit, direct debit, credit cards, etc. If you want to know more about filings and payments, please click here.
Filing frequencies and due dates
You must file the sales tax monthly, due on the 20th day of the following month. However, you will get the quarterly filing status when your taxable sales are below $100 per month. In that case, file your sales tax by the 20th day of the following month from the end of the relevant quarter.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official website of the North Carolina Revenue Department, where you can see what the state has to say about sales tax filing due dates.
Are there any fines or penalties for default in filing or paying sales tax?
The state levies a penalty of 5% of the sales tax due per month, up to a maximum of 25% of the tax due.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the guidelines issued by the North Carolina Department of Revenue for penalties and interest.
Sales tax holiday in North Carolina
North Carolina has repealed the sales tax holiday.