Online Sales Tax in North Carolina

Accounting for North Carolina’s Online Taxes

As anyone who has ever filed their taxes knows, accounting for everything that you own can be taxing. This becomes even more confusing when you have to try and account for online purchases made and self-report the sales tax. This is usually the time around when most people just hire an accountant to do their tax preparation.

Given the bevy of rulings, counter-rulings, and unclear instructions, you could rightly ask “Do I have to pay internet sales tax on this? Are they pre-deducted?” This is where the Raleigh accountants of C.E. Thorn, CPA, PLLC can help you. We’ve done the research to tell you the taxes you need to pay and what is already covered.

North Carolina’s "Amazon Tax"

Thankfully for the sanity of the customer, the state of North Carolina actually has what is called an “Amazon Tax” on the books. Normally, companies are only required to charge state sales tax on products if they have a physical location in North Carolina.

For example, a company with no offices anywhere in the state would normally not be required to charge sales tax. However, if the company opened a single-room office in Raleigh, North Carolina, they would be obliged to include sales tax.

This changed with the introduction of an “Amazon Tax” in 2009 (although companies had 5 years to prepare compliance meaning that the law came into force in 2014). This was a new update on the laws governing remote sales, and requires any business that has more than $10,000 a year gross receipts from sales to North Carolina Customers to include a North Carolina sales tax.

This accomplishes the dual goal of satisfying the state’s need for revenue and simplifying the process for the consumer. If, however, you are buying from a smaller retailer you don’t just get away tax-free. There is something on the books called a “Use Tax”, and this is where the services of a knowledgeable accountant can really be a boon to your bookkeeping.

The "Use Tax" and What It Means for Your Accounting

According to the North Carolina Department of Revenue, the “Use Tax” is applicable on any purchase “where retailers or facilitators do not collect sales or use tax on taxable transactions.” What this means in practical terms is that you need to tell your account and let him or her know if you have made any purchases that could fall under the “Use Tax.”

While retailers like Amazon and EBay will not, smaller boutique retailers often will, so make sure to do your bookkeeping so you or your Raleigh accountant can do your North Carolina state tax preparation correctly. The "Use Taxes" are tallied on your yearly tax returns, so any purchases that might fall under the purview of a Use Tax must be cataloged and accounted for. Use the services of a certified public accountant in Raleigh to make sure that you did not miss any “Use Taxable” items on your NC tax returns.

Non-Taxed Goods and Services in North Carolina

It used to be that only tangible goods could be taxed under North Carolina’s Sales Tax. However, this changed on March 1, 2016, with an update to the "Sales & Use Tax" that removed exemptions services including but not limited to for preventative maintenance, calibration, restoration, troubleshooting and installation related to tangible personal property or motor vehicles, including separately stated installation charges that were previously exempt under North Carolina statutes.

As the inclusion of auto maintenance in the taxable services indicates, the determination of what is and is not taxed from an out of state supplier is often intimidating for the common consumer, and this is another area where a Raleigh certified public accountant can help you with your tax preparation.

Rules to Remember about North Carolina Online Sales Tax

North Carolina’s application of its "Sales and Use Tax" has become more complicated since the implementation of the “Amazon Tax” in 2009/2014 and since the addition of certain types of services under the "Sales Tax" that used to be exempt. While there are some simple rules to remember such as “tangible products are almost always subject to a sales tax” and “large online retailers must charge state sales tax,” there is a definite need for an accountant to help with the bookkeeping, especially if the customer has a habit of buying from smaller online retailers and requires "Use Tax" filings.

Schedule a Consultation with a Raleigh Accounting Firm

We offer business and personal tax return preparation for our monthly business accounting clients in the Raleigh area. If you are in need of a consultation with a Raleigh accounting firm of C.E. Thorn, CPA, PLLC, please fill out the online contact form or give us a call at 919-420-0092.