How Much Is North Carolina Sales Tax?

Sales tax is a consumption tax applied to the price of goods and certain services purchased by consumers. This tax is a significant source of revenue for state and local governments, supporting various public services and infrastructure. North Carolina operates a sales tax system that combines statewide and local rates, affecting transactions within the state.

North Carolina Sales Tax Rates

North Carolina has a state sales tax rate of 4.75% for most retail sales. This rate forms the base for additional local taxes, impacting the total amount consumers pay. Local sales tax rates, which include county and transit taxes, vary by jurisdiction, ranging from 0% to 2.75% across the state.

When state and local rates are combined, the total sales tax rate in North Carolina can range from 4.75% to 7.5%. For example, a purchase in a county with a 2.25% local rate would result in a combined 7% sales tax. Qualifying food sold for home consumption is subject to a reduced state rate of 2%, though local taxes may still apply. Prepared food and beverages are generally subject to the full combined state and local sales tax rate.

Goods and Services Subject to Sales Tax

Sales tax in North Carolina applies to the retail sale of tangible personal property. This includes physical goods such as computers, home furnishings, clothing, jewelry, sporting goods, and vehicles. The tax also extends to leases and rentals of tangible personal property.

Beyond physical goods, North Carolina also taxes certain digital property and specific services. Taxable digital property includes digital audio and audiovisual works, electronic books, magazines, and prewritten software. Services subject to sales tax include repair, maintenance, and installation services, telecommunications, prepaid telephone calling services, and admission charges to entertainment activities.

Sales Tax Exemptions

North Carolina provides specific sales tax exemptions. Most groceries and food items sold for home consumption are exempt from the statewide 4.75% sales tax, though they may still be subject to a 2% local food tax in many counties. Prescription drugs and certain medical supplies are also exempt.

Exemptions extend to certain agricultural items, particularly when sold by the producer in their original, unprocessed state. Purchases of raw materials that become a component part of a manufactured product are exempt. Electricity, fuel, and piped natural gas sold to a manufacturer for direct use in manufacturing operations are also exempt from sales tax.

How Sales Tax Works

Businesses operating in North Carolina are responsible for collecting sales tax from customers at the time of purchase. The sales tax is added to the price of taxable items or services. The seller acts as an agent for the state by collecting these funds.

Once collected, businesses are required to remit the sales tax to the North Carolina Department of Revenue. If sales tax was not charged on a taxable purchase, particularly from out-of-state vendors, consumers may owe a use tax directly to the Department of Revenue.