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Changes to North Carolina sales and use tax laws.
The North Carolina Department of Revenue has published a tidy summary of all changes to sales and use tax law enacted in 2013. Anyone doing business in North Carolina would do well to read through it, unless you automate and outsource sales and use tax collection.
The state sales and use tax rate is 4.75%, however all localities impose additional local rates. In the majority of North Carolina, the combined state, local and transit sales and use tax rate is 6.75%. The following counties have a higher combined tax rate:
- Alexander, Buncombe, Cabarrus, Catawba, Cumberland, Duplin, Edgecombe, Greene, Halifax, Haywood, Hertford, Lee, Martin, Montgomery, New Hanover, Onslow, Pitt, Randolph, Robeson, Rowan, Samson, Surry and Wilkes Counties are taxed at 7.00%;
- Mecklenburg County has a combined rate of 7.25%; and
- Durham and Orange Counties are taxed at 7.50%.
Changes to- and expansion of- sales tax
Effective January 1, 2014:
- Manufactured homes and modular homes are to be taxed at the general state rate of 4.75%, rather than the current rate of 2.00% and 2.50%, respectively. However, neither manufactured nor modular homes will be subject to local and transit sales and use taxes.
- Admission charges for the following are to be subject to the combined state and local tax rate: live performances of any kind; motion pictures or films; and museums, cultural sites, gardens, exhibits, shows, and guided tours at any of these. Certain special events are exempt from sales and use tax, pursuant to G.S. 105-164. 13(60) .
- Sales and use tax is imposed on the sales price of service contracts–defined as “a warranty agreement, a maintenance agreement, a repair contract, or a similar agreement or contract by which the seller agrees to maintain or repair tangible personal property.” Certain service contracts are exempt from sales tax under G.S. 105- 164. 13(61) .
Effective July 1,
- Retailers must pay a combined general rate of 7.00% on “the gross receipts derived from sales of electricity billed on or after July 1, 2014.” Special lower rates that currently apply to laundry, dry-cleaning establishments, and all gross receipts derived from sales of electricity are to be repealed.
- Sales of piped natural gas billed after July 1, 2014, are to be taxed at the combined general rate of 7.00%. The exemption currently in place is to be repealed.
Exemption repeals and other legislative changes
Numerous repeals and amendments were enacted in 2013, including but not limited to:
- Certain computer software “purchased” to run on an enterprise server operating system is exempt from sales and use tax, effective August 23, 2013. Prior to that date, the exemption applied for computer software “designed” to run on an enterprise server operating system. (G.S. 105-164. 13(43a)a).
- Local government sales and use tax sourcing rules are amended, effective August 23, 2013, to “clarify a retailer engaged in business in the state and required to collect the general state rate of tax … is required to collect a local use tax on a transaction if a local sales tax does not apply to the transaction.” (G.S. 105-467(c)).
- Effective July 1, 2014, “sales of breads, rolls, and buns at a bakery thrift store are subject to the general state and applicable local and transit sales and use taxes.” Prior to that date, the reduced food tax rate of 2.00% applies.
North Carolina lawmakers also took care of a a couple of punch-list items, including but not limited to:
- Criminalizing the use, transfer, purchase, installation, or possession of automated sales suppression devices. Effective December 1, 2013, tax zappers will be a Class H felony.
Keeping abreast of sales tax rate and legislative changes around the country is truly a taxing job. Implementing those changes is exhausting. An automated sales tax solution makes it simple.