North Carolina – Several Counties Levy Additional Sales Tax

SALT Report 1391 – The following counties, Buncombe, Durham, Montgomery, and Orange, have levied an additional 0.25% local sales and use tax effective April 1, 2012. The additional tax will apply to sales and purchases of tangible personal property, certain digital property, and all transactions subject to the general state sales and use tax. However, sales of food subject to the 2% rate will not be subject to the 0.25% local sales and use tax increase.

Combined State and Local Rates

Effective April 1, 2012, the general state and local rate will be 7% in Alexander, Buncombe, Cabarrus, Catawba, Cumberland, Duplin, Durham, Halifax, Haywood, Hertford, Lee, Martin, Montgomery, New Hanover, Onslow, Orange, Pitt, Randolph, Robeson, Rowan, Sampson, Surry and Wilkes Counties; 7.25% in Mecklenburg County; and 6.75% in all remaining counties.

Leases and Rentals

The gross receipts derived from the lease or rental of tangible personal property and certain digital property sourced to Buncombe, Durham, Montgomery, and Orange Counties are subject to the 7% general state and local rate. The gross receipts derived from the lease or rental of tangible personal property or certain digital property sourced to Buncombe, Durham, Montgomery, and Orange Counties on or after April 1, 2012, are subject to the 7% general State and local tax rate.

Construction Contracts

Construction materials purchased by a contractor or subcontractor in conjunction with a lump-sum or unit-price contract in Buncombe, Durham, Montgomery, or Orange County that were entered into or awarded to a general contractor on or after April 1, 2012, will be subject to the 2.25% local tax rate plus the 4.75% state sales and use tax rate.

Form E-589D, Affidavit to Exempt Contractors from the .25% County Sales and Use Tax, should be issued to a retailer by a contractor or subcontractor to purchase construction materials on or after April 1, 2012. For purchases of construction materials by a subcontractor for use in a contract entered into or awarded before April 1, 2012 should obtain written documentation from the general contractor and attach a copy to Form E-589D.

Cash Basis

A retailer who reports and pays sales and use tax on the cash basis of accounting is liable for remitting the 2.00% local tax rate on collections received on or after April 1, 2012 for sales sourced to Buncombe, Durham, Montgomery, or Orange County prior to April 1, 2012. A retailer must separately account for money received on or after April 1, 2012 in order to remit the proper tax to the Department. If a retailer is unable to separately account for money received on or after April 1, 2012 for transactions sourced to Buncombe, Durham, Montgomery, or Orange County before April 1, 2012, the retailer will be liable for remitting the 2.25% local tax rate on all collections received on or after April 1, 2012.

For Further Information:

North Carolina Department of Revenue – Important Notice