Taxes

 

Taxes are the primary way local, state, and federal governments raise revenue to pay for essential services such as education, defense, and highways. Further, as employers, businesses play a vital role in the collection of taxes including federal and state income and social security taxes and state sales taxes.

Compliance with your business tax responsibilities can be complicated. This information on this site is intended to introduce you to some of the basics. It should not be construed as professional tax or legal advice. If you have specific questions about your tax responsibilities it is best to consult a tax professional or attorney.

Tax Information Numbers

One of the first steps in complying with you federal tax responsibilities is obtaining a Federal Tax Identification Number (TIN). The TIN is similar to a Social Security Number in that it serves as the primary identifier for your business to the Internal Revenue Service (IRS) when filing various businesses tax forms.

You must apply for a Tax Identification Number, sometime abbreviated as TIN, from the IRS when your business employs any person other than yourself. The Tax Identification Number is sometimes referred to as an Employer Identification Number, or EIN, for this reason. If you operate your business as a corporation or partnership you must also obtain a TIN even if you have no employees. Sole proprietors who have no employees and do not file any excise or self-employed pension plan tax returns can use their Social Security number.

The North Carolina Department of Revenue requires businesses that employ anyone other than the owner to obtain a state Tax Identification Number. Like the federal Tax Identification Number the state Tax Identification Number serves as the primary identifier for your business with the North Carolina Department of Revenue.

    State & Federal Business Income Tax

    Businesses, just like individuals, pay income taxes. How you file and pay your business income taxes will depend on thestructure of your business. North Carolina business income taxes operate similarly to federal income taxes, in that they vary by business type.

    Businesses established as sole proprietorships must file a statement of profit or loss from the business (Schedule C) along with your Federal personal income tax return (Form 1040). In North Carolina, the business's profit or loss is combined with the owner's other income and is reported their individual state tax return. (Form D-400).

    Each partner in a partnership must report their share of the business earnings for the year on their individual return (Form 1040). Additionally the business must file the informational Form 1065 with the Internal Revenue Service. The information reported in this filing should match the information reported on each partners' individual returns. Every partnership required to file a federal partnership return must also file a North Carolina Partnership Income Tax Return (Form D-403), and individual partners must report their share of income on their individual state returns.

    Tax treatment of Limited Liability Corporations (LLCs) will vary by its classification with the Internal Revenue Service. LLCs may be treated as a sole proprietorship, a partnership, or a corporation depending on the election made using Form 8832. If the LLC does not file a Form 8832, then the Internal Revenue Service Files makes a default classification based on the number of owners. If the LLC has only one owner, the default classification is sole proprietorship. If the LLC has two or more owners, the default classification is a partnership.

    Corporations must file a Federal Corporate Income Tax Return (Form 1120). If you received compensation as an employee of the business, you will receive a Wage and Tax Statement (Form W-2) and must report those earnings on your individual tax return. All corporations doing business in North Carolina, regardless of where they are headquartered, are required to file a corporate income tax return (Form CD-405 or Form CD-401S).

      If you have specific questions about your tax responsibilities contact the Internal Revenue Service or the North Carolina Department of Revenue directly or consult a tax professional or attorney.

      State & Federal Payroll Taxes

      If a business employs any person other than the owner, it must register with the IRS as an employer. Using yourEmployer Identification Number you must report and pay three types of federal payroll taxes: Employee withholding taxes, Federal Insurance Contribution Act (FICA) taxes, and Federal Unemployment Tax Act (FUTA) taxes.

      Employee withholding taxes are incomes taxes owed by employees to the federal government but retained by the employer and submitted to the IRS. FICA taxes are the employer's and employees' contributions to Social Security and Medicare. FUTA taxes are the sole responsibility of the employer and may not be withheld from employee wages. If you are the sole employee of your business you are still responsible for paying for Social Security and Medicare coverage through the self-employment tax.

      These various withholdings and taxes must be reported to the IRS and paid by the employer on at least a quarterly basis.

        Employers in North Carolina must report and pay two types of state payroll taxes: Employee withholding taxes and State Unemployment Tax Act (SUTA) taxes. Employee withholding taxes are incomes taxes owed by employees to the state government but retained by the employer and submitted to the North Carolina Department of Revenue. SUTA taxes are the sole responsibility of the employer and may not be withheld from employee wages.

        If you have specific questions about your tax responsibilities either contact the North Carolina Department of Revenue directly or consult a tax professional or attorney.

        Local & State Sales Tax

        If your business sells products and some services directly to customers at a retail level, you are required to collect state and local sales taxes. If your business purchases materials and inventory at a wholesale level which will become part of the product or products you sell, you may be eligible to receive an exemption on those purchases. For more information on sales and use tax visit the North Carolina Department of Revenue.

        The current statewide sales general tax rate is 4.25 % and the local rate is 2.5% in every county except Dare and Mecklenburg counties. This results in a combined sale tax rate of 6.75% in 98 out of 100 North Carolina counties. The local sale tax rate for the sale of food or food products is 2%.

        The frequency for filing and remitting sales taxes collected by your business varies by the size of the business. If the business consistently owes less $100 a month in state and local sales tax then the business may file quarterly. If the business consistently owes less than $10,000 a month in local and state sales tax then the business must report monthly. If the business consistently owes more than $10,000 a month in local and state sales tax then the business must report semi-monthly. The form to file a sales tax return is E-500.

        Certain business must also collect and remit taxes on certain goods and services like cigarettes, soft drinks, and lodging accommodations.

        • Alleghany County Tax Office  
          The Alleghany County Tax Office is responsible for the assessing, listing and collection of all real estate, personal property, business property and registered motor vehicles located within Alleghany County.

        • Ashe County Tax Office  
          Ashe County Tax Administration is responsible for generating revenue through property taxes to be used in funding local county government. They identify all taxable property, determine an assessed value, prepare tax notices and collect outstanding amounts. They also maintain public records and provide assistance to anyone who needs to access these records.

        • Avery County Tax Assessor's Office  
          The Tax Assessor’s Office has the responsibility of valuing Real Property within the County for the purpose of taxation.

        • Caldwell County Tax Department  
          The Tax Administrator’s Office is a multi-function office, charged with the responsibility of maintaining records on all real and personal property in Caldwell County.

        • Mitchell County Tax Assessor  
          The Tax Assessor is charged with fairly and properly appraising property for Mitchell County government tax purposes.

        • Watauga County Tax Office  
          The Watauga County Tax Office lists and assess all real and personal property in the county and collects taxes based on the value of those properties.

        • Wilkes County Tax Administrator  
          The Tax Administrator is responsible for the administration of Wilkes County's tax system. The system includes; listing and assessment of all property located in the county; tax collection, tax mapping/land records, and the direction of the reappraisal of all real property.

        • Yancey County Tax Office  
          Provides assistance finding local tax information for Yancey County.

        Local Property Taxes

        Businesses are also subject to local business personal and real property taxes. Business personal property includes computer and office equipment, supplies, materials, machinery, farm equipment, leasehold improvements, etc used or connected with a business. Inventories (goods held for sale in the regular course of business by manufacturers, retail merchants, and contractors) are exempt from property tax. This includes raw materials, goods in process of manufacturing and finished goods. Business real property includes land, buildings, structures, improvements, and permanent fixtures. A number of exemptions to real property taxes are allowed under the law the most common of which are the homestead and present use value (for farm, horticulture & forestry use) exemptions.

        Each year the business must list the business personal property associated with a specific business site in the county where the property is located. The county tax assessor will in turn make an appraisal of the value of the property and prepare a tax bill. The appraisal of real property occurs at least every eight years. Improvements to real property must be listed on an annual basis.

        For more information contact your local county tax assessor office:

        • Alleghany County Tax Office  
          The Alleghany County Tax Office is responsible for the assessing, listing and collection of all real estate, personal property, business property and registered motor vehicles located within Alleghany County.

        • Ashe County Tax Office  
          Ashe County Tax Administration is responsible for generating revenue through property taxes to be used in funding local county government. They identify all taxable property, determine an assessed value, prepare tax notices and collect outstanding amounts. They also maintain public records and provide assistance to anyone who needs to access these records.

        • Avery County Tax Assessor's Office  
          The Tax Assessor’s Office has the responsibility of valuing Real Property within the County for the purpose of taxation.

        • Caldwell County Tax Department  
          The Tax Administrator’s Office is a multi-function office, charged with the responsibility of maintaining records on all real and personal property in Caldwell County.

        • Mitchell County Tax Assessor  
          The Tax Assessor is charged with fairly and properly appraising property for Mitchell County government tax purposes.

        • Watauga County Tax Office  
          The Watauga County Tax Office lists and assess all real and personal property in the county and collects taxes based on the value of those properties.

        • Wilkes County Tax Administrator  
          The Tax Administrator is responsible for the administration of Wilkes County's tax system. The system includes; listing and assessment of all property located in the county; tax collection, tax mapping/land records, and the direction of the reappraisal of all real property.

        • Yancey County Tax Office  
          Provides assistance finding local tax information for Yancey County.

        If you have specific questions about your tax responsibilities consult a tax professional or attorney.