How to Charge Sales Tax on Shipping in North Carolina
The United States's11th most populous state, North Carolina is expected to experience even more population growth. The U.S. Census Bureau projects that North Carolina will have 9.8 million residents by 2025, up from the 7.3 million recorded in the 2000 census. One reason new residents are flocking to North Carolina is its fantastic economic growth; according to Dr. Michael Walden of North Carolina State University, the state's economy "outperformed the nation in growth during the last expansion from 2002 to 2007."
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Instructions
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Collecting sales taxes brings administrative costs to the state. Confirm if you are required to collect and remit sales and use taxes to North Carolina. According to North Carolina's Department of Revenue, if a "retailer is located out-of-state and does not have a physical location or other type of physical representation in the state, the state cannot require the retailer to collect North Carolina's tax." Since the collection and remittance of sales tax entails added business costs and administrative responsibilities, it is important to analyze the costs and benefits of collecting and remitting the taxes.
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Sales of all tangible goods and many digital goods are taxed. Ensure that the sales and use taxes are applicable to the goods you will ship to North Carolina. According to the North Carolina Department of Revenue, "all purchases of tangible personal property that would be subject to the sales tax if purchased in North Carolina are subject to the use tax." In addition, certain digital categories of goods qualify for the sales and use taxes; consult the Certain Digital Property Subject to Sales and Use Tax publication of the Department of Revenue to see if the any digital goods you sell qualifies for the sales and use taxes; for example software can qualify whether it is downloaded or shipped.
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Register with the North Carolina Department of Revenue to collect the sales and use tax. The Department of Revenue advises businesses to use Form NC-BR Business Registration Application to register with the department.
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Accounting professionals can help you collect taxes at the point of sale. Use your online shopping cart or offline point-of-sale system to charge North Carolina sales and use tax on sales of goods sold to North Carolina customers. It is important to program your system to calculate the sales tax only after subtotaling the product price and shipping. Since the tax rates are constantly changing, it is your responsibility to ensure that you stay abreast of changes, especially increases.
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Tips & Warnings
If you operate a business through a corporate entity organized under the laws of a state other than North Carolina, you will likely have to apply to the North Carolina Secretary of State for an Application for Certificate of Authority.
It is imperative that you consult with your legal and accounting professionals to fully determine the impact, advantages, and disadvantages of choosing to collect and remit sales and use taxes on shipping to North Carolina.
Consumers who shop online have a predisposition to be extremely price sensitive, and many will frown upon being required to pay taxes on the shipping costs in addition to the purchase price; this can create a competitive disadvantage for you.
References
Resources
- North Carolina: Dept of Revenue: Frequently Asked Questions About Use Tax
- North Carolina: Dept of Revenue: Who Should Register and File for Sales and Use Tax?
- North Carolina: Dept of Revenue: Form NC-BR Business Registration Application for Sales and Use Tax
- North Carolina: Dept of Revenue: Sales Tax Rates
- North Carolina: Secretary of State: Forms - Application of Certificate of Authority
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