North Carolina: Sales Tax Handbook
What purchases are taxable in North Carolina?
The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the North Carolina sales tax.
Contents1.) Taxability of Goods and Services
- General North Carolina taxability guidelines
- Are services subject to sales tax?
- Is shipping & handling subject to sales tax?
- Are drop shipped items taxable?
Section 1: Taxability of Goods and Services
What transactions are generally subject to sales tax in North Carolina?
In the state of North Carolina, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. Some examples of items that exempt from North Carolina sales tax are prescription medications, some types of groceries, some medical devices, and machinery and chemicals which are used in research and development.
This means that an individual in the state of North Carolina who sells school supplies and books would be required to charge sales tax, but an individual who owns a store which sells groceries is not required to charge sales tax on all of its products.
Are services subject to sales tax in North Carolina?
In the state of North Carolina, services are not generally considered to be taxable. For example, a service whose work includes creating or manufacturing a product, it is very likely considered to be taxable, and thus you would most likely have to pay sales tax on the service.
You can find a table describing the taxability of common types of services later on this page.Top
Are shipping & handling subject to sales tax in North Carolina?
In the state of North Carolina, the laws regarding tax on shipping and handling costs are relatively simple. Essentially, the vast majority of items shipped in North Carolina have shipping costs which are taxed. If both exempt and non-taxable items are being shipped together, the percentage of the shipping charge that relates to the taxable items must be taxed.Top
Are drop shipments subject to sales tax in North Carolina?
"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In North Carolina, drop shipments are generally subject to state sales taxes.
Section 2: Taxability of Various Items in North Carolina
This table shows the taxability of various goods and services in North Carolina. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.
|Products on Amazon.com||TAXABLE *|
|General Clothing||TAXABLE *|
|Food and Meals|
|Grocery Food||EXEMPT *|
|Leases and Rentals|
|Motor Vehicles||EXEMPT *|
|Tangible Media Property||TAXABLE|
|Manufacturing and Machinery|
|Raw Materials||EXEMPT *|
|Utilities & Fuel||EXEMPT *|
|Medical Goods and Services|
|Medical Devices||EXEMPT *|
|Newspapers and Magazines|
|General Occasional Sales||EXEMPT|
|Motor Vehicles||EXEMPT *|
|Optional Maintenance Contracts|
|General Optional Maintenance Contracts||TAXABLE *|
|Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts||EXEMPT *|
|Pollution Control Equipment|
|General Pollution Control Equipment||TAXABLE *|
|Software and Digital Products|
|Canned Software - Delivered on Tangible Media||TAXABLE|
|Canned Software - Downloaded||TAXABLE *|
|Custom Software - Delivered on Tangible Media||EXEMPT|
|Custom Software - Downloaded||EXEMPT|
|Customization of Canned Software||TAXABLE *|
|Digital Products||TAXABLE *|
|Vending Machine Sales|
* See notes in category taxability page for details
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