North Carolina Sales Tax Guide
Chapter 1: An introduction to North Carolina sales tax management
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. North Carolina first adopted a general state sales tax in 1933. Since that time, the rate has risen to 4.75. In the second quarter of 2015, the North Carolina Division of Taxation reported $1,718,912 in revenue from taxes on general sales and gross receipts; 22.8% of total North Carolina state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of North Carolina by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the North Carolina Division of Taxation. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does North Carolina sales tax need to be collected?
In North Carolina, sales tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect sales tax in North Carolina?
To better understand whether you need to collect sales tax in North Carolina, we've created a simple three step checklist you can use to get a better feel for your North Carolina tax situation:
- Do I have nexus in North Carolina?
- Am I selling taxable goods or services to North Carolina residents?
- Is my buyer required to pay sales tax?
If the answer to all three of the questions above is "Yes", then you are required by the North Carolina Division of Taxation to collect, file, and remit sales tax.Does sales tax accept out-of-state resale certificates?
Yes! At the time of publication, the North Carolina Division of Taxation is accepting out-of-state resale certificates.What happens if I don't collect any sales tax?
If you meet the criteria for collecting sales tax (nexus in North Carolina and selling taxable goods or services to taxable residents) and choose not to collect sales tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is North Carolina a Streamlined Sales Tax (SST) state?
At this time, North Carolina is a full member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to North Carolina?
North Carolina is a destination-based state. Destination-based states are those where the transaction location is defined as the customer delivery location rather than the shipping location of the business. As a seller in North Carolina, this means you are responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.