The Eastern Region is home to so many great companies for many different reasons. One key reason is North Carolina’s favorable tax laws. There are generally lower taxes in the state. Companies operating in the Eastern Region will benefit from having no local or state taxes on custom computer programs and no property tax on computer software, no sales tax on raw materials, and no tax on inventory or intangibles.
State Taxes and Fees:
A $125 charge is payable upon filing article of incorporation; a fee of $250 for application for certificate of authority. In addition, an annual report with a $18 online filing fee or a $25 paper filing fee must be filed with the Department of Revenue.
A franchise tax is levied on business corporations at the rate of $1.50 per $1,000 of the largest of three alternate bases. These bases are (a) the amount of capital stock, surplus, and undivided profits apportionable to the state; or (b) 55% of the appraised value of property in the State subject to local taxation; or at the book value of real and tangible personal property in the State less any debt outstanding which was created to acquire or improve real property in the State.
An income tax is levied at the rate of 6.9% on the portion of the net income allocable to the State.
Sales and Use Tax
The State levies a general retail sales and use tax at 5.25%. (The 2.5% local sales and use tax rate applies to transactions subject to the state 5.25% general rate and to food purchases for home consumption.)
Purchases of the following items by manufacturers are taxable at 1%: coal, coke, and fuel oil used in manufacturing; manufacturing machinery and equipment; and parts and accessories to manufacturing machinery. The maximum tax on a single article of machinery or equipment is $80.
Raw material, containers, labels, packaging and shipping materials, and motor vehicles are exempt from sales and use tax.
Piped Natural Gas Tax
The tax rate is a declining block rate based on the number of therms of gas consumed in a month. The rate starts at 4.7% for the first 200 therms received and declines to 0.3¢ for the number of therms received in excess of 50,000.
Highway Use Tax
NC levies a tax on the privilege of using the highways at the rate of 3% of the retail value of a motor vehicle. The tax cannot exceed $1,000 for Class A and Class B commercial vehicles and $1,500 for other motor vehicles.
Employment Security Tax
Businesses are subject to a payroll tax if they have one or more employees for twenty different weeks during a calendar year or pay $1,500 in wages in any calendar quarter during a calendar year in NC. The tax is payable quarterly and applies to wage payments up to $19,300 per employee. Entities commencing business in NC are subject to a tax rate of 1.20% during the first two years.
Sales and Use Tax
All counties levy local sales and use taxes at the rate of 2.25% on food purchased for home consumption and on transactions subject to the state 5.5% general rate, such as sales of building materials, office equipment, etc.
General Property Tax
There is only one assessment in each county. Property is to be assessed at 100% of appraised value. Property appraised at the full value at the time of appraisal may appreciate until appraised value is only 50% or 60% of true value by the end of the eight-year period. Actual ratios vary from county to county.
The tax rates vary from county to county and from town to town. County wide rates range from 23¢ to 84¢ per $100 of appraised valuation. In much of the state only county-wide rates apply outside of cities and towns.
Excluded from property taxation are manufacturers’ inventories (raw materials, goods in process, finished goods, materials or supplies consumed in processing, crops, and other agricultural or horticultural products held for sale), contractors’ inventories (goods held by contractors to be furnished in the course of building, installing, repairing, or improving real property), livestock, poultry, and inventories of retail and wholesale merchants (tangible personal property held for sale and not manufactured, processed, or produced by the merchant). Computer software is exempt from taxation. "Bill and hold" goods manufactured in NC and held by the manufactured for shipment to a non-resident customer are exempt.
Tax Free Zones
There are six Foreign or Free Trade Zones (FTZ) in North Carolina. Two are strategically located within the Eastern Region. Foreign or domestic merchandise may enter these areas without a formal customs entry, or the payment of customs duties, or government excise taxes without a thorough examination. For more on the FTZ, click here.
Pollution Abatement Equipment
Property used to reduce air or water pollution receives special treatment under the tax laws of NC, based on compliance with the Board of Environmental Management. Such real and tangible personal property is exempt from taxation under the property tax laws and is subject to the preferential 1% state sales tax rate as "accessory" to manufacturing machinery.
Equipment of facilities installed for the purpose of the recycling solid waste or resource recovery from solid waste received the same treatment under the tax laws as that given to pollution abatement equipment.