Understanding what is North Carolina sales tax is crucial whether you’re a business owner, consumer, or someone relocating to the state. North Carolina’s sales tax system affects everything from your grocery bills to major purchases, and knowing the rates, exemptions, and rules can save you money and keep you compliant.
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Current NC Sales Tax Rate
As of 2024, North Carolina’s state sales tax rate is 4.75%. This is one of the lower state rates in the country, which is good news for consumers. However, this is only the beginning of the story. When you add local sales taxes—which can range from 2% to 2.75% depending on the county—your total sales tax burden can reach between 6.75% and 7.5%. That means a $100 purchase could cost you anywhere from $106.75 to $107.50 depending on where you shop.
The state rate has remained stable at 4.75% since 2013, so you won’t see sudden jumps in the base rate. But local jurisdictions can and do adjust their portions, so it’s worth checking your specific county’s current rate.
How North Carolina Sales Tax Works
North Carolina uses a destination-based sales tax system, meaning the tax rate applied depends on where the item is delivered or received, not where the seller is located. This matters especially for online purchases and interstate commerce. If you buy something online from an out-of-state retailer and have it shipped to your NC address, NC sales tax applies.
The tax is calculated on the sales price of tangible personal property and certain services. Retailers collect the tax at the point of sale and remit it to the North Carolina Department of Revenue. For consumers, it’s straightforward: you pay the tax at checkout. For businesses, the compliance requirements are more involved.
One thing that confuses many people: sales tax is regressive, meaning it takes a larger percentage of income from lower-income families. A family earning $30,000 per year spends a much higher percentage of their income on taxable goods than a family earning $150,000. This is why some states exempt essentials like groceries.
State vs. Local Sales Tax Breakdown
Understanding the split between state and local is important for businesses and for knowing your true tax burden. The state collects 4.75%, but then local governments—counties and municipalities—can add their own rates. Here’s how it breaks down:
- State portion: 4.75% (goes to North Carolina Department of Revenue)
- Local portion: 2% to 2.75% (varies by county and municipality)
- Total range: 6.75% to 7.5%
For example, if you’re in Wake County (home to Raleigh), your local rate is 2.25%, bringing your total to 7%. In Mecklenburg County (Charlotte), it’s 2.25% as well. But in some rural counties, you might only pay 2%, resulting in a 6.75% total rate.
This is similar to how other states handle sales tax. If you’re comparing to sales tax in CT or PA sales tax, you’ll notice each state has its own structure, but the destination-based approach is becoming standard.
What’s Taxed and What’s Not
Not everything you buy is subject to sales tax in North Carolina. The rules can be surprisingly specific, and understanding them can help you budget more accurately.
Taxable items include:
- Clothing and accessories
- Electronics and appliances
- Furniture and home goods
- Vehicles (though there’s also a separate motor vehicle tax)
- Software and digital goods
- Prepared foods and restaurant meals
- Haircuts and salon services
- Repairs and maintenance services
Tax-exempt items include:
- Unprepared groceries and food for home consumption
- Prescription medications
- Medical devices and equipment
- Agricultural equipment and supplies (for farmers)
- Manufacturing equipment
- Most services (though there are exceptions)
The distinction between prepared and unprepared food is crucial. A loaf of bread from the grocery store? No tax. A sandwich from a deli counter? Taxed. A rotisserie chicken? Taxed. It’s about whether the item is ready-to-eat.
Groceries and Food Items
This is where North Carolina differs from some states. Unlike states that exempt all groceries, NC only exempts unprepared food items meant for home consumption. This means:
- Raw vegetables, fruits, and meats: No tax
- Bread, milk, and packaged goods from the shelf: No tax
- Hot foods from a deli: Taxed at 4.75% + local
- Takeout from a restaurant: Taxed
- Catering services: Taxed
- Candy and soft drinks: Taxed (considered prepared foods)
The logic here is that prepared foods are more of a service than a product, so they’re treated differently. If you’re buying ingredients to cook at home, you’re supporting basic nutrition and avoid tax. If you’re buying convenience, you pay tax.
Services Subject to Sales Tax
This is where many people get surprised. North Carolina taxes more services than you might expect. The state has a relatively broad definition of taxable services:
- Personal services: Haircuts, manicures, massages, tanning beds
- Repair services: Auto repair, appliance repair, phone repair
- Installation services: Carpet installation, HVAC installation
- Cleaning services: House cleaning, dry cleaning, laundry
- Delivery services: Food delivery, package delivery surcharges
- Rental services: Car rentals, equipment rentals (but not hotel rooms—those have a separate occupancy tax)
However, professional services like accounting, legal advice, medical services, and dental work are generally exempt. The rule of thumb: if it’s a personal or repair service that’s not professional in nature, it’s likely taxed.
Common Tax Exemptions Explained
Beyond the basic exemptions for groceries and prescription drugs, North Carolina offers several other exemptions that are worth knowing:
Business-to-business purchases: When a business buys goods for resale or raw materials for manufacturing, they can often avoid sales tax by providing a resale certificate. This prevents double-taxation of the same item.
Agricultural exemptions: Farmers can buy equipment, seeds, and supplies without paying sales tax. This is an important economic incentive for the agricultural sector.
Non-profit organizations: Qualifying non-profits can purchase items tax-free for charitable purposes. They need to register with the state and maintain proper documentation.
Government entities: Federal, state, and local government purchases are exempt from sales tax.
If you think you qualify for an exemption, you’ll need to register with the NC Department of Revenue and obtain the appropriate certificate. It’s not automatic—you have to apply and maintain compliance.
Business Seller Obligations
If you’re selling taxable items in North Carolina—whether online, in-store, or through a marketplace—you have legal obligations. The state requires sellers to:
- Register for a sales tax permit: You need this before you start selling. It’s free and takes about 10 minutes online.
- Collect sales tax: You must charge the appropriate rate for the destination where the customer receives the item.
- File returns: Depending on your sales volume, you’ll file monthly, quarterly, or annually.
- Remit taxes: You send the collected taxes to the NC Department of Revenue by the due date.
- Keep records: Maintain detailed sales records and documentation for at least 3 years.
- Handle returns and refunds: If a customer returns an item, you may need to refund the tax.
If you’re selling online and have nexus in North Carolina (meaning you have a physical presence or significant economic activity there), you must collect and remit sales tax. The Wayfair Supreme Court decision means that even without a physical location, if you exceed certain sales thresholds, you’re required to collect tax. For North Carolina, the economic nexus threshold is $100,000 in sales annually.
Filing and Payment Deadlines
The NC Department of Revenue sets specific deadlines for sales tax filings. Missing these can result in penalties and interest, so mark your calendar:
- Monthly filers: Due by the 20th of the following month
- Quarterly filers: Due by the 20th of the month following the quarter
- Annual filers: Due by January 31st of the following year
You file through the NC Department of Revenue’s online system. If you’re using accounting software or a point-of-sale system, many of these platforms can integrate with the state’s filing system to make compliance easier.
Late payments accrue interest at the rate set by the state (currently around 8% annually) plus potential penalties. If you’re more than 30 days late, you could face a 10% penalty on top of interest. It’s worth setting up reminders or using an accountant to ensure timely filing.
How NC Compares Nationally
North Carolina’s 4.75% state rate is competitive. Here’s how it stacks up:
- Lowest in the nation: Alaska, Delaware, Montana, New Hampshire, and Oregon have no state sales tax
- Lower than NC: Colorado (4.63%), Georgia (4%), Hawaii (4.165%)
- Higher than NC: Virginia (5.3%), South Carolina (6%), Tennessee (9.55%)
- Average nationally: About 5.5%
When you include local taxes, NC’s total burden is reasonable. A 7% combined rate is below the national average of about 7.4%. If you’re comparing to Maine sales tax rate, which is 5.5% state plus local, or Los Angeles sales tax, which reaches 9.5%, North Carolina is quite reasonable.
The state’s tax structure is also relatively stable. Unlike some states that have made dramatic changes, NC has kept its rate steady for over a decade, which helps with business planning and consumer budgeting.
Frequently Asked Questions
Do I have to pay sales tax on online purchases from out-of-state retailers?
Yes, if the retailer has nexus in North Carolina (physical presence or meets economic thresholds) and ships to your NC address, you’ll pay NC sales tax. If they don’t collect it, you’re technically responsible for paying “use tax” to North Carolina, though this is rarely enforced for individual consumers. Most major retailers now collect NC sales tax automatically.
Is there a sales tax on used items?
Used items sold by private individuals are generally not taxed. However, if you buy used items from a business or dealer, sales tax applies. For example, a used car sold by a dealer is taxed, but a car sold between friends is not. Used clothing and furniture from thrift stores are taxed.
What about digital products and subscriptions?
Digital goods like software, e-books, and streaming services are subject to North Carolina sales tax. This includes subscriptions like Netflix, Spotify, and cloud storage services. The tax applies to the delivery of the digital product to your NC address.
Can I get a refund of sales tax I’ve already paid?
Generally, no. Sales tax is a final tax on the consumer. If you return an item, the retailer refunds the tax along with the purchase price. If you overpaid due to an error, you can request a refund from the NC Department of Revenue, but you’d need to provide documentation.
Do out-of-state businesses need a North Carolina sales tax permit?
If you’re selling into North Carolina and have economic nexus (over $100,000 in annual sales), yes, you need to register and collect sales tax. You don’t need a physical location, but you do need to comply with the state’s tax laws. Failure to do so can result in significant penalties.
Are there any upcoming changes to North Carolina sales tax?
As of 2024, there are no major changes planned to the state rate. However, local rates can change, and the legislature periodically discusses tax reform. It’s worth checking the NC Department of Revenue website for updates, especially if you’re a business owner.
Key Takeaways
Understanding what is North Carolina sales tax helps you make better financial decisions and stay compliant if you’re a business. Here’s what you need to remember:
- North Carolina’s state sales tax is 4.75%, with local rates adding 2% to 2.75%, for a total of 6.75% to 7.5%
- The tax applies to most tangible goods and many services, but excludes unprepared groceries and prescription drugs
- The distinction between prepared and unprepared food is important for budgeting
- Businesses must register, collect, and remit sales tax if they have nexus in the state
- Filing deadlines vary by volume of sales, and missing them carries penalties
- NC’s rates are competitive nationally and have been stable for over a decade
If you’re a consumer, knowing these rules helps you understand your actual cost of living. If you’re a business owner, staying compliant protects you from penalties and keeps your operations legal. Either way, it’s worth taking time to understand how sales tax affects your wallet.
For more information, visit the North Carolina Department of Revenue website or consult with a local tax professional who understands the state’s specific rules and local variations.
