North Carolina levies a 4.75% statewide sales tax on the retail purchase of most goods and some services. Combined with local sales taxes, residents of North Carolina pay an average of 7.25% in total sales tax based on the latest data. But rates reach over 8% in places like Durham and Orange counties. Understanding sales tax laws and North Carolina sales tax calculator help taxpayers make smart purchasing decisions and ensures businesses collect and remit the proper amounts.
North Carolina Sales Tax Calculator
The North Carolina sales tax calculator is a handy online tool that allows you to easily calculate the total sales tax due for a purchase in North Carolina. To use the calculator, you simply select the county and city where the purchase will take place using a drop-down menu. You then enter the total pre-tax purchase price. The calculator will automatically look up the combined state and local sales tax rates for that location and calculate the total sales tax amount owed.
North Carolina Sales Tax Calculator
North Carolina Sales Tax Calculator
It’s a very convenient way to estimate the sales tax for a purchase in North Carolina, as sales tax rates vary widely across different cities and counties. The calculator ensures you calculate the correct rate and don’t accidentally underpay your taxes at checkout. It’s a great resource for shoppers and businesses making taxable purchases in North Carolina.
Overview of North Carolina Sales Tax
North Carolina first enacted a 3% sales tax in 1933 during the Great Depression. The rate increased incrementally over time before landing at 4.75% in 2011. The state applies this tax to retail sales of tangible goods along with accommodations, utilities, and other defined services. Local county and city governments can also assess their own sales taxes on top of the statewide rate.
In addition to general sales tax, North Carolina imposes excise taxes on vehicles at 3% of the purchase price. The excise tax applies each time a motor vehicle is sold, whether from a dealer or private individual.
What Transactions are Subject to Sales Tax in North Carolina?
North Carolina levies sales tax on the following common transactions:
- Clothing and footwear
- Furniture and home goods
- Electronics like TVs, computers, tablets
- Toys, games, hobby supplies
- Digital goods including apps, ebooks, music, movies
- Restaurant meals
- Hotel stays
- Automobile purchases
- Alcoholic beverages
- Appliance and equipment repairs
- Admissions to movies, concerts, sporting events
While quite extensive, the sales tax does exempt some transactions like prescription and over-the-counter medications, non-prepared groceries, gasoline, and farming equipment.
Exemptions to North Carolina Sales Tax
North Carolina provides some common sales tax exemptions such as:
- Groceries – Food bought for home consumption is exempt, though prepared meals are taxed.
- Prescription drugs – Prescription medications and certain medical products are exempt.
- Manufacturing machinery and equipment
- Farm equipment and supplies
- Nonprofits – Valid nonprofits can purchase goods tax exempt with an E-595E certificate.
Understanding local rules around services and intangibles can get more complex for North Carolina sales tax. But the state at least follows a familiar structure for exempting necessities like food and medicine while taxing discretionary goods.
Who Collects and Remits North Carolina Sales Tax?
Retailers based in North Carolina or making taxable sales into the state must collect and remit sales tax for transactions. This includes brick-and-mortar stores along with online and mail order sellers exceeding economic nexus thresholds.
Marketplaces like Amazon and eBay must collect North Carolina sales tax on sales made by their third-party sellers. Remote affiliates meeting certain criteria may also have nexus requiring them to charge tax to North Carolina residents.
The burden falls on vendors to add the correct combined state and local tax rates to receipts based on delivery location. Sellers must then file regular sales tax returns with the state.
How North Carolina Uses Sales Tax Revenue
North Carolina relies on sales and use tax as a major source of funding for core services across the state. In fiscal year 2021, North Carolina generated $7.3 billion in sales tax revenue. Some examples of programs supported by sales tax include:
- Public education – K-12 schools, community colleges, state universities.
- Healthcare – Medicaid, mental health and rehabilitation services.
- Public safety – Courts, law enforcement, forensics, corrections.
- Transportation – Highway maintenance, public transit, motor vehicle offices.
- General operations – State worker salaries, benefits, equipment, buildings.
Without sales tax, North Carolina would need to impose higher income, property, or other taxes to maintain these services. Proper collection also keeps the system fair by spreading the burden across all taxpayers instead of letting some avoid paying.
Recent and Possible Future Changes to Sales Taxes in North Carolina
Like most states, North Carolina frequently adjusts sales tax policies, rates, and exemptions through new legislation:
- Income tax cuts – Recent legislative changes reduced individual and corporate income tax rates, making sales tax more important.
- Online seller collection – An expanded nexus statute took effect in 2019 following the South Dakota v. Wayfair ruling.
- Tobacco tax increases – Higher excise taxes on traditional and vapor cigarettes passed in 2019 and 2020.
- Hybrid vehicle fees – Surcharges took effect in 2020 on electric and hybrid vehicle registrations.
- Medical device exemptions – Lawmakers may consider exempting certain healthcare equipment and supplies from sales tax.
- Sales tax base expansion – Officials periodically reexamine taxing currently exempt transactions like groceries or services.
Understanding the latest tax law changes in North Carolina can help taxpayers make smart financial decisions and know what transactions they legally owe tax on.
Sales Tax Compliance Tips for Businesses in North Carolina
Here are some tips for North Carolina businesses to stay compliant with collecting and remitting sales tax correctly:
- Obtain sales tax registration – Register for an ID number if you make taxable sales in North Carolina. You can apply through the state Department of Revenue website.
- Charge all applicable rates – Verify you are using the correct combined state and local tax rate for each transaction based on delivery destination. Zip codes and addresses determine the appropriate rate.
- Collect on online and catalog sales – Remit North Carolina tax on any orders shipped to state addresses. The marketplace facilitator may handle this for you on sites like Amazon.
- File sales tax returns on time – Returns for state tax are due the 20th of the next month. Local return due dates vary. Physical offices can still e-file returns if you don’t have software.
- Keep proper records – Retain purchase orders, receipts, resale certificates, and other documentation to back up your tax payments and exemptions.
- Stay updated on law changes – Be aware of any new tax policies, rates, filing procedures that could impact your obligations. Sign up for newsletters from the Department of Revenue.
Conclusion
North Carolina levies moderate sales tax rates compared to neighboring states. But combined state and local taxes still add over 7% on average at the register. Consumers should be aware of costs for major outlays like cars and furniture. Carefully managing household budgets around sales taxes while making use of exemptions allows North Carolina taxpayers to reduce their overall burden. Meanwhile, businesses must diligently follow complex economic nexus and market facilitator laws to apply the right tax rates to online, mobile, and brick-and-mortar sales. With increasing use of e-commerce and frequent policy changes, North Carolina sales tax will remain a moving target for both consumers and enterprises in 2023.
