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North Carolina Sales Tax Application

 

Sales Tax

The state of North Carolina sales tax is 4.75%.  Local governments have the latitude to collect a local tax just as long as it does not to exceed 2.75% sales tax.  Within the states borders, there are about 324 local tax jurisdictions.  Across the state the average local tax is 2.188%.  In conjunction with the state sales tax and the local tax the cities of Chapel Hill, Durham, Hillsborough along with five other cities have the highest tax rate of 7.5% within the state.

 

Sales and Use Tax License

Sales tax permits are mandatory for most businesses in North Carolina.  New businesses or if someone is initiating sales for the first time within the state of North Carolina, then you will need to know and understand which business permit(s) (if any) are required.  After submitting the application for a North Carolina Sales and Use Tax Account ID, one could be ready to conduct business operations instantly.

 

Note: A business is regarded as having established sales tax nexus within the state of North Carolina is considered as having a taxable presence within the state.

 

Resale Certificate

There is no requirement in the state of North Carolina for registration with the state in order to obtain a resale certificate. Resellers looking to purchase tax exempt items at retail can fill out, complete and use the Streamlined Sales and Use Tax Agreement Certificate of Exemption Form (Form E-595E).

 

Retailers wishing to make purchases with the purpose of resale or execute transactions that is exempt from North Carolina sales tax, one is obligated to obtain and have in their possession the necessary North Carolina sales tax exemption certificate before you are authorized to make tax-free purchases.

• Streamlined Sales Tax Certificate of Exemption
• Streamlined Sales Tax Certificate of Exemption (Multistate)

Note: Uniform sales tax exemption certificates are also acceptable in North Carolina, this is a common or general certificate that maybe used across various states.

 

Sales Tax Exemption Certificate – Is no more than a form presented to a vendor at the time of making a sales tax-free purchase.  It is your responsibility to fill out & complete the form but responsibility falls on the vendor to validate that you are indeed qualified to make tax-exempt purchases.

Note:  North Carolina has specific forms to be used when making tax exempt purchases such as prescribe medication.

 

• Certificate of Exemption – available for use to purchase or acquire any item considered to be tax exempt within the state of North Carolina (also known to be a general certificate).

In conducting transactions, the purchaser presents the seller with their written certificate and legally documenting the exemption.  Those things that are included in the certificate include:

• Date certificate was created
• Signature of buyer, agent or representative on buyer’s behalf
• Both parties’ names and addresses
• Legal stance of the exemption being utilized
• Buyer’s tax registration and/or a business license number
• Description of items buyer intends to buy or purchase

 

Expiration of North Carolina sales tax exemption certificate

In North Carolina blanket certificates has no set expiration date thus making the certificate valid indefinitely or unless it is cancelled by the buyer.

Note: At least one purchase must be made per year in order to remain valid

 

Blanket Resale Certificate

In North Carolina, the use of blanket certificates are permitted for use.  As long as a vendor maintains on file a single certificate then it may be reused for all exempt purchases made between a specific buyer and that particular vendor. It is not necessary for a new certificate for every transaction between that particular vendor and buyer.

 

North Carolina is an affiliate of the Streamlined Sales and Use Tax Agreement; the goal of this interstate partnership is to make compliance with sales tax simplistic amongst associated states.  As a result of this affiliation, buyers within the state of North Carolina can use the Multistate Tax Commission (MTC) Uniform Sales Tax Certificate when conducting qualifying sales tax-exempt transactions from vendors within the state.

 

Taxable Items

Within the state of North Carolina, sales tax is legally mandated to be collected as a result of selling any/all “tangible goods” and personal property to a customer.  Exceptions to this tax includes prescribed medications, certain types of groceries, some medical devices, as well as chemicals and machinery that can be utilized in research and development.

 

Services

Businesses within the service industry in the state of North Carolina are usually not required to pay a sales tax.  The exception to this rule is, if a business within the service industry produces, manufactures, or makes a “tangible product” has the potential to come with an associated tax.

 

Shipping and Handling

North Carolina’s guidance as it pertains to shipping and handling cost is very simplistic.  Just about every item shipped in North Carolina will have associated shipping fees applied to it and those fees or cost will be taxed.

NOTE: If a shipment contains both taxable and non-taxable items, shipping cost should only be applied to the portion of the shipment that is taxable. 

 

Drop Shipments

In the state of North Carolina, drop shipments normally are subject to state sales tax(es).  Drop shipments is a commonly used business practice of shipping via a third party hired by the vendor (usually located in another state) to be transported to the purchaser.