As of October 1, 2008, North Carolina assesses a 4.5 percent state sales tax on the retail sales price of tangible personal property and on a limited number of services. These taxable services are (1) hotel and motel rentals; (2) dry cleaning, laundry, and similar services; (3) sales of gas and electricity; and (4) telecommunications. The state sales tax rate will increase to 4.75 percent from October 1, 2009.

North Carolina also authorizes its counties to assess additional sales and use taxes.

Liability for use tax. In order to avoid losing tax revenues on sales transactions taking place outside the state, North Carolina also imposes a use tax. The use tax is assessed against all persons who store, use, or otherwise consume tangible personal property in North Carolina that was purchased out-of-state. If the out-of-state seller you purchase property from is a registered retailer in North Carolina, you should pay the use tax to the retailer. If the retailer is not registered in North Carolina, you should pay the use tax directly to the state.

Sales and use taxes on services. In order to avoid losing tax revenues on services being provided outside the state, North Carolina imposes a use tax on services. The state assesses this use tax against all persons who store, use, or otherwise consume tangible personal property in North Carolina that was transferred to them by out-of-state service providers.

Sales and use taxes on leased property. In general, all leases and rental agreements involving tangible personal property are treated as sales. As a result, leased and rented property is subject to sales tax.

The following discussions address additional sales and use tax issues that many small business owners face:

• sales and use tax obligations of a purchaser
• sales and use tax obligations of a seller