Overview of North Carolina Sales Tax Exemptions and Rates
North Carolina nonprofits are exempt from state sales tax. Maintain documentation detailing organizations tax-exempt status. Residents’ military pay is subject to state income tax. Nonresidents’ active duty pay is not taxable. Military income earned out-of-state is tax-free. Retired and survivor benefit pay is tax-free.
North Carolina Sales Tax Exempt Items and Rates
Essential goods exempt from sales taxes: clothing and footwear under $110; unprepared food; items for clothing manufacturing. Exempt from state sales tax: beauty services; health salons, gyms; baths. Purchasers pay sales tax unless exempt. 38 states approve Multistate Tax Commission’s Certificate. Sales exempt to states, agencies, cities, counties, nonprofits. Exemptions based on type of use.
Sales Tax Exemption Requirements and Processes
North Carolina sales tax rate is 4.75%. Provide fundraising vendors exemption forms. Sales of digital works to home schools are exempt if a qualifying education expense. Electronic sales of digital works with nontaxable service content exempt if transfer contemporaneous.
Items purchased for resale exempt if seller accepts Texas resale certificate form instead of sales tax.
Reasons for Sales Tax Exemptions
Many states exempt food from sales tax or charge lesser rates. Repair, maintenance, installation services and contracts exempt from North Carolina sales tax. Property and services used to fulfill exempt service contracts are taxable. Reasons for exemptions: necessity of essential items; government policies to encourage behaviors or support industries.
Requirements for Sales Tax Collection in North Carolina
Who is required to collect sales tax in North Carolina? North Carolina sales tax rate is 4.75%. Provide nonprofits fundraising vendors exemption forms. Sales of digital works to home schools exempt if a qualifying education expense. Companies with physical or economic nexus required to collect North Carolina sales tax. Physical nexus means significant presence or enough activities to require collecting sales tax.
Obtaining Sales Tax Exemption Certificate in North Carolina
How to get a sales tax exemption certificate in North Carolina? In North Carolina, you’ll obtain the certificate of exemption form from the Department of Revenue. Keep in mind that you do not need to file the certificate with the state, but merely keep it in your records. In a few states, a seller’s permit, or sales tax permit, also serves as a certificate of exemption that applies to all vendors.
Sales Tax Resale Certificate in North Carolina
How to get a resale certificate in North Carolina? To get a resale certificate in North Carolina, you may fill out the Streamlined Sales and Use Tax Agreement Certificate of Exemption Form (Form E-595E).
Understanding Sales Tax Exemption Certificates
A sales tax exemption certificate is a form you can fill out yourself certifying that you meet the qualifications outlined for making sales-tax-free purchases. You will need to present this certificate to the vendor from whom you are making the exempt purchase – it is up to the vendor to verify that you are indeed qualified to make a tax-exempt purchase.
Certificates of exemption can be a bit of a hassle, but in North Carolina they are an absolute necessity. So take the time to get certificates for each of your vendors to ensure full compliance with your state’s tax regulations.
North Carolina Form E-595E, Streamlined Sales and Use Tax Agreement Certificate of Exemption, is to be used for purchases for resale or other exempt purchases.
If your customer is exempt from sales tax, you should obtain a valid North Carolina sales tax exemption certificate (Form E-595E) from the customer, which verifies their exempt status.
There are two types of permits in North Carolina, the Use Tax Permit and the General Sales and Use Tax Permit. Please read the information associated with the two permits types carefully to determine which permit is the best choice for your business. Currently, there is no charge to apply for either sales tax permit in North Carolina.
Because each North Carolina county and city charges a slightly different sales tax rate in North Carolina, it is recommended you use a sales tax calculator to determine the rate that will apply for your municipality.