Sales Tax Guide for North Carolina

What Is Taxable in North Carolina?

In North Carolina, most tangible personal property is subject to sales tax. However, some items are exempt, such as prescription drugs, certain types of medical equipment, and some groceries. It’s crucial for businesses to understand what products and services are taxable to comply with state regulations.

If you’re running a business that sells goods or services in North Carolina, you must collect sales tax unless a specific exemption applies. This includes ensuring that any purchases made from out-of-state are properly taxed through use tax when applicable.

Who Needs to Collect Sales Tax?

Sales tax collection obligations in North Carolina apply to:

• Retailers with a physical location or presence in the state
• Online sellers meeting the state’s economic nexus thresholds
• Certain service providers, based on the nature of the service

North Carolina requires remote sellers to collect sales tax if they make over $100,000 in sales or have 200 or more separate transactions in the state. Failing to collect sales tax when required can result in penalties—in which case, having access to doola’s bookkeeping services can help you stay compliant and avoid legal issues.

How to Register for a Sales Tax Permit in North Carolina

Registering for a sales tax permit in North Carolina involves several steps:

1. Prepare important documents: Obtain an EIN, a business license, and have details on your business entity.
2. Visit the North Carolina Department of Revenue website.
3. Complete the online sales tax permit application form.
4. Receive your Sales Tax ID and start collecting taxes at the point of sale.

Collecting sales tax without a permit is illegal, so ensure registration before selling taxable items or services. For streamlined registration and compliance, you can consult doola’s bookkeeping specialists, who offer expert assistance in tax-related procedures.

How to Calculate Sales Tax in North Carolina

Accurate sales tax calculation is essential for compliance:

Step 1:
Determine both the state and any applicable local sales tax rates for your business’s location and your customer’s residence.

Step 2:
Collect the correct sales tax amount at checkout.

Step 3:
Maintain precise records for each transaction involving tax.

Businesses in North Carolina are required to file sales tax returns monthly, quarterly, or annually, depending on their taxable sales. Ensure you meet all deadlines to avoid late payment fees.

It’s also important to note that different localities may have additional tax rates, so factor these into your calculations as needed. 

Common Sales Tax Exemptions in North Carolina

Some activities and organizations are exempt from North Carolina’s sales tax, including:

• Purchases for resale (a valid resale certificate is needed)
• Sales to certain nonprofit organizations
• Specific equipment used in manufacturing and agriculture

To claim these exemptions, businesses must complete the correct forms and maintain thorough records. Misapplication of exemption certificates can result in audits and potential fines.

Remote Seller and Marketplace Sales Tax Rules in North Carolina

North Carolina has specific rules for managing sales tax for remote sellers and online marketplaces like Amazon, Etsy, and Shopify.

If a remote business exceeds the economic nexus thresholds of $100,000 in sales or 200 or more transactions, they must comply with North Carolina’s sales tax requirements and regulations.

These sellers may need to collect both state and local sales taxes, as applicable, based on where the buyer is located.

What Triggers a Sales Tax Audit

North Carolina businesses could be selected for a sales tax audit for various reasons, such as inaccurate sales tax filings, consistently late payments, discrepancies between reported and actual sales, and improper use of exemption certificates.

To minimize audit risk, keep comprehensive records of sales activities, exemptions, and tax payments. Regular internal audits can help ensure that your tax filings remain accurate and up-to-date.

FAQs About Sales Tax in North Carolina

Businesses often have several questions regarding North Carolina sales tax:

Are digital goods taxed in North Carolina? 

Some digital goods can be taxable, so it’s necessary to review state guidelines for current rules.

Do out-of-state businesses have to collect North Carolina sales tax? 

Yes, if they exceed the $100,000 sales threshold or have more than 200 transactions.

What should I do if I overcharge or undercharge sales tax? 

You’ll need to either refund customers or pay discrepancies to the state. Keeping accurate records can help you avoid such issues.

Are services taxable in North Carolina? 

Many services are exempt, but there are exceptions. Services like repair or installation can be taxable.

Stay Compliant With doola

Navigating sales tax can be challenging, but with the right knowledge and tools, managing compliance is possible. By staying informed and organized, you can avoid penalties and keep your business operating smoothly.

doola is here to help you stay compliant, providing financial insights, tax compliance assistance, and bookkeeping services tailored for your business needs.