North Carolina sales tax rules for online stores

Putting a store on a website does not change what North Carolina taxes; it changes how many transactions you have to get right. Three statutory points cover most of what a small online retailer needs to know before the first order, and one question is worth leaving to an accountant.

Register before you sell. The registration rule (certificate of registration required before selling at retail) requires anyone engaging in business as a retailer in North Carolina to obtain a certificate of registration from the Department of Revenue first. It is a separate step from forming an LLC and from launching the site, and it is the one most often skipped by owners who assume the business filing covered it.

Charge the right rate. The state imposes its tax on retailers at 4.75 percent of net taxable sales (NC general sales tax rate 4.75%), and local sales taxes are added on top. An online store therefore charges a combined rate that depends on where the sale is taxed, not one flat percentage. Your checkout configuration is where this becomes real; a store that charges the state rate alone is under-collecting on every order.

Know what the digital definition covers. For NC sales tax, the definition (G.S. 105-164.3(253) — 'specified digital products' defined) limits 'specified digital products' to digital audio works, digital audiovisual works and digital books. A shop selling downloadable music, video or e-books is dealing with that category; a shop selling physical goods is dealing with tangible personal property, taxed under the general rate. The statute's general rate also reaches certain other digital property and the repair, maintenance and installation of goods, so a business that sells and installs should look at both lines.

What we will not claim: whether a website design service itself is taxable. The statute does not list web design among its enumerated taxable categories, but we have not read a Department of Revenue ruling on the point, and a blanket statement either way would be a guess. Ask your accountant how your own invoices should be treated.

The store also carries the obligations every site does. The Justice Department's position is that the ADA applies to websites of public-facing businesses, and a checkout is a set of forms that must work with a keyboard and a screen reader. Card numbers are personal information under North Carolina law, so let a payment processor hold them rather than your site.

Register with the Department of Revenue, configure the combined state-and-local rate, classify digital products correctly, and confirm the treatment of your own services with an accountant. Then open the store.