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North Carolina to Have Tax Reform


 North Carolina tax reform to bring big change.

Earlier today, North Carolina Governor Pat McCrory (R) signed a comprehensive tax reform package into law. He spoke of the upcoming changes with optimism, noting that the new law "puts more money in families budgets" and will "restore confidence for North Carolina businesses."

Not everyone shares the governor's good feelings. FayObserver.com reports that opponents worry the state will be left with even less money than it has now, and that some taxpayers will have to pay more taxes, not less.

North Carolina Tax Reform at a Glance

The governor's website highlights certain aspects of the tax reform legislation:

  • Broadened tax base to include certain services;
  • Reduced and simplified personal income tax (uniform rate of 5.8% in 2014);
  • Reduced corporate income tax;
  • Capped state gas tax;
  • Eliminated state death tax; and
  • Preserved sales tax refund for nonprofits.

Sales Tax Changes

Sales tax changes are highlighted in HB 998. These include, but are not limited to, the following:

  • General rate of sales tax applies to admission charges to movies, museums, and live entertainment, effective January 1, 2014.
  • General rate of sales tax applies to sales of service contracts, which include warranty and maintenance agreements, repair contracts, or similar agreements, effective January 1, 2014.
  • General rate of sales tax applies to sales of electricity and natural gas, effective July 1, 2014.
  • General rate of sales tax applies to sales of manufactured homes sold at retail and modular homes sold at retail, effective January 1, 2014.
  • Sales and use tax exemption on certain purchases for qualified farmers, effective July 1, 2014.
  • Eliminates state sales tax holidays.

The general rate of sales tax is 4.75%. Local taxes may also apply.

North Carolina is one of several states looking to increase revenue by broadening sales tax to include more services. Minnesota, Vermont and Massachusetts are on a similar path.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.