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Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
February 12, 2024 Reviewed by
Kevin is a licensed CPA in the state of California. Prior to Numeral, Kevin operated multiple ecommerce businesses and worked at KPMG as a tax advisor.
North Carolina is a great location to start an ecommerce business. But you need to understand the taxation laws before you begin.
In this articleNorth Carolina is a great location to start an ecommerce business. But you need to understand the taxation laws before you begin.
| State taxing authority | North Carolina Department of Revenue (NCDOR) |
|---|---|
| North Carolina base sales tax rate | 4.75% |
| Local tax rates | Up to 2.25% |
| 2023 North Carolina sales tax rate: | 7.5% |
| Tax threshold | $100,000 in annual sales or 200 separate sales transactions |
| Website | www.ncdor.gov |
| Tax Line | 1-877-252-3052 |
The North Carolina sales tax rate in 2023 is 4.75% to 7.5%. This comprises a base rate of 4.75% plus a mandatory local rate of up to 2.25%. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 7.5%.
On July 1, 2022, North Carolina's cigarette tax has been fixed at $0.30 per pack of 20. But as average cigarette prices have increased, the effective tax rate has declined, helping maintain the costs.
To calculate North Carolina sales tax, you can use the formula:
Sales tax = (4.75% + local rate) * purchase price.
For instance, if the local rate is 2%, and the purchase price is $100, the sales tax would be $6.75.
North Carolina has a destination-based sales tax system. The sales tax rate is determined based on the customer's ship-to address.
For example, if you operate your business in Virginia and ship products to customers in North Carolina, you would charge the sales tax rate applicable to the customer's location in NC.
North Carolina is a Streamlined Sales Tax state. They joined the Streamlined Sales and Use Tax Agreement (SSUTA) in 2005.
Who should collect sales tax in North Carolina? Let’s look at the nexus thresholds.
| Type of nexus | Threshold |
|---|---|
| Physical presence | Any physical presence such as an office, warehouse, employees, etc. |
| Economic nexus | $100,000 in sales or 200 transactions |
Yes, wholesalers in North Carolina need a seller's permit to buy items tax-exempt for resale.
Yes, even temporary sellers like vendors at craft fairs need a North Carolina seller's permit if they meet the sales tax nexus thresholds.
Let’s look at the taxable items exempt from sales taxes in North Carolina.
North Carolina sales tax applies to sales of most tangible personal property and some services, including
Besides prepared foods, most groceries are exempt from sales tax in North Carolina.
Yes, clothing is generally taxable in North Carolina.
Yes, North Carolina taxes digital products like ebooks, music downloads, streaming services, etc.
No, North Carolina does not tax SaaS or other digital services.
Some services like telecom, accommodations, and repairs are taxable in North Carolina. Most professional and personal services are not taxable.
Excise taxes are taxes levied on specific goods or services. Discretionary taxes are taxes that local governments impose, and the rates can vary from city to city.
North Carolina has taxes on:
Remote sellers with over $100,000 in sales or 200 transactions in North Carolina must collect and remit sales tax. This economic nexus threshold took effect November 1, 2018.
North Carolina allows counties and cities to impose local sales taxes up to 2.25% on top of the state sales tax.
Let’s look at the steps to collect sales tax in North Carolina now.
If you meet the economic nexus thresholds for North Carolina, you must register with the NCDOR and collect applicable state and local sales tax on taxable sales shipped to North Carolina, even if you do not have a physical presence in the state.
You can register for a seller’s permit online through the NCDOR website. Once registered, you can begin collecting and remitting North Carolina sales tax.
Yes, if the sale is taxable, the shipping charges are also taxable in North Carolina.
Businesses registered for a seller's permit in North Carolina must file sales tax returns and remit any collected sales tax monthly or quarterly. Returns and payments are due by the 20th of the month following the reporting period.
The NCDOR assigns a filing frequency to businesses based on their anticipated taxable sales. This schedule is either monthly or quarterly.
The following due dates apply to North Carolina sales tax returns:
If the total tax liability is less than $20,000 and at least $100 per month, must file monthly.
| Period | Due Date |
|---|---|
| January | February 20 |
| February | March 20 |
| March | April 20 |
| April | May 20 |
| May | June 20 |
| June | July 20 |
| July | August 20 |
| August | September 20 |
| September | October 20 |
| October | November 20 |
| November | December 20 |
| December | January 20 |
Note: If your monthly tax collection exceeds $20,000, you are required to file monthly with prepayment. The prepayment must be 65% of the tax due for the current month, tax due for the same month in the previous year, or the average monthly tax in the previous calendar year.
If the monthly tax liability is less than $100, you must file your taxes quarterly.
| Period | Due Date |
|---|---|
| January – March (Q1) | April 30 |
| April – June (Q2) | July 31 |
| July – September (Q3) | October 31 |
| October – December (Q4) | January 31 |
Businesses that fail to file their North Carolina sales tax returns on time are subject to a penalty of 5% of the tax for each month, or fraction thereof, that the return is late up to a maximum of 25% of the tax.
The due date for filing returns in North Carolina is the 20th of the month following the period end date.
For example, if the filing period ends on March 31, the return is due April 20.
The due dates for filing North Carolina sales tax returns are:
Yes, you still need to file a zero-tax North Carolina sales tax return even if you didn't collect any sales tax.
You can request up to a six-month extension to file your North Carolina sales tax return by submitting form D-410. However, any tax due must be paid on time—the extension is for filing only.
Yes, you can file an amended return in North Carolina to correct errors or report additional tax due. You may be charged penalties and interest.
The audit & appeals process is a series of steps a business must go through if the North Carolina Department of Revenue audits them. The process begins with the auditor contacting the business to schedule an audit.
The auditor will then review the business's records and tax returns to determine if sales tax was not paid. If the auditor finds any discrepancies, they will report their findings.
The business then has the opportunity to appeal the findings. If the appeal is denied, the business can then appeal to the North Carolina Court of Appeals.
The North Carolina sales tax audit process is:
The auditor will review sales records, exempt sales, and use tax payments to identify unreported tax liability.
Contesting audit findings with the auditor in North Carolina helps you:
Here are the steps for registering for sales tax in North Carolina:
To register for sales tax in North Carolina, you can visit the North Carolina Start My Business website. You will need to provide:
Once registered, you must collect and remit North Carolina sales tax.
Online sellers with over $100,000 in sales or 200 transactions in North Carolina in the current or prior calendar year must register to collect sales tax.
There is no cost to register for a certificate of registration in North Carolina.
You only need to register with the NCDOR or NC Start My Business website to obtain a seller's permit/sales tax license in North Carolina.
For sales tax filing and appeals in North Carolina, contact:
There you have it—a comprehensive guide on North Carolina's sales tax rules and regulations. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.
Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
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