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Frequently Asked Questions About Use Tax
What is use tax?
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The use tax is a tax due on purchases made outside of North
Carolina for storage, use, or consumption in North Carolina. The use tax
is paid to the N. C. Department of Revenue by the purchaser when the North
Carolina tax has not been collected by the seller. Use tax is not a new
tax. It was first enacted in 1939. |
What is the use tax rate?
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The use tax is calculated at the same rate as
the sales tax. |
What items are subject to use tax?
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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. Some examples include: books, cassettes, compact discs, computers,
electronic equipment, clothing, jewelry, canned software, sporting goods,
audio and video tapes, appliances, and furniture and other home furnishings,
whether purchased by mail order, catalog, shopping networks, or on the internet. |
Why doesn't the out-of-state retailer collect the tax?
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If the 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. However,
some out-of-state retailers voluntarily collect the North Carolina tax as
a convenience to their customers. |
Why do we have to start paying use tax now?
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The use tax has been in existence since 1939. The Department has been
including information about use tax owed to North Carolina in the instructions of the
Individual Income Tax Form Booklet since 1990. The Use Tax Report, Form E-554, was included
in the booklet from 1991 until the 1999 General Assembly passed legislation requiring
individuals to pay the use tax on their income tax returns. Businesses must register and
file Form E-500, Sales and Use Tax Return, to report and remit use tax due on items purchased
for use in their businesses. |
How did the Department determine the amount of use tax due in the Use Tax Table
on page 8 of the Individual Income Tax Instructions?
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The Department compared the information used
in other states and made adjustments for the combined North Carolina state
and local rates of tax. |
I rarely make purchases from out-of-state vendors. Do I still have to pay the
amount of use tax shown in the Use Tax Table?
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If you believe the estimate from the table is too high
for your out-of-state purchases, you may estimate what you think you owe. |
If the calculated amount of use tax due is higher than the use tax due when
using the Use Tax Table, which amount do I pay?
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You should only use the Use Tax Table if you do not know
the amount of purchases subject to use tax; therefore, you pay the calculated
amount of tax. |
If I enter "0" on the use tax line or do not enter an amount, will
I receive a bill or be audited?
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You will not receive a bill if you do not enter an amount
or if you indicate that no use tax is due. However, your income tax return
must be signed verifying that the information on the return is correct.
If the Department discovers that you owe use tax on out-of-state purchases,
you will be assessed tax plus penalties and interest. In addition, your
records could be audited. |
If I make purchases of tangible personal property while in another
state, do I owe North Carolina use tax on these purchases?
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If the items are purchased for storage, use, or consumption
in North Carolina, they are subject to the North Carolina use tax whether
the purchases are delivered to you in another state or shipped to you in
North Carolina. If you paid another state's sales or use tax on the out-of-state
purchases, that amount may be credited against the North Carolina use tax
due. You may not claim a credit for sales tax or value-added tax paid to
another country. |
If I purchase tangible personal property from an out-of-state
retailer, are the shipping and handling charges subject to the North Carolina
use tax?
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All shipping and handling, transportation, and delivery charges that are in any
way connected with the taxable sale of tangible personal property are subject to the North
Carolina use tax. |
Didn't the Internet Tax Freedom Act (ITFA) ban taxes on sales over the Internet?
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The Act prohibited new taxes on internet access fees and
multiple or discriminatory taxes. North Carolina does not tax the access
fee. In addition, the use tax is not a multiple or discriminatory tax since
it applies to all vendors (mail order, internet, out-of-state, home shopping)
and taxes goods purchased outside the state in the same manner as goods
purchased in the state. |
Last modified on:
01/02/08 03:22:19 PM.
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