The right tax structure to benefit your company

A favorable tax structure has helped North Carolina achieve Site Selection magazine’s “Top Business Climate” for eight of the last nine years.

Taxes

Citizens and businesses in North Carolina enjoy one of the more moderate tax structures in the country. Based on per capita tax burden, North Carolina ranked 26th in the nation according to the US Census Bureau. This can be attributed, at least in part, to the fiscally conservative model in which state government operates.

In addition, North Carolina is distinguished by the taxes which it does not impose. There are no inventory taxes, and the state intangibles tax (on receivables and securities) was repealed with the 1995-96 tax year.

Companies and individuals in Winston-Salem/Forsyth County also benefit from a lack of local payroll taxes and some of the lowest property tax rates among urban areas in the Southeast region. At the local level, Winston-Salem is one of a handful of cities in the entire nation to consistently earn a AAA rating for its municipal debt. Forsyth County also enjoys a AAA debt rating.

Local Property Tax Rates

Property taxes in North Carolina are assessed by each county. Property is assessed at 100% of appraised value, which is determined every four years in Forsyth County. The 2010-2011 property tax rate for Forsyth County is $0.674 per $100 of valuation. Within Winston-Salem City limits, there is an additional assessment of $0.475 per $100 of valuation. There are no school district taxes in Forsyth County, nor is there a state-level property tax. Manufacturers and wholesalers' inventories are excluded from property taxation.

Source: North Carolina Department of Revenue, Tax Research Division. City rates are assessed in addition to county rates when property is located inside city limits.

Unemployment Compensation and Workers Compensation

See the Labor Force section of this site for details.

State Tax Credits and Incentives

Visit the Incentives section on state and local programs available and also visit the North Carolina Department of Commerce site.

Sales and Use Tax Discounts, Exemptions and Refunds

North Carolina offers reduced rate allowances on certain parts, accessories and construction supplies for eligible industries and manufacturing processes.

For example:

• Industrial machinery and equipment is exempt from sales and use tax but is subject to an excise tax. This rate is 1 percent with a maximum of $80 per item.
• Parts and accessories to manufacturing machinery, which include most supplies used in the manufacturing process but not becoming a part of the manufactured product, including pollution abatement equipment, are taxed at 1 percent.
• Purchases of ingredients or component parts of manufactured products are exempt from sales or use tax.
• Packaging containers and items that become part of a manufactured product and are delivered with the product to the customer are exempt from sales and use tax.
• Bioprocessing, pharmaceutical and medical manufacturing and distribution, aircraft manufacturing, computer manufacturing and semiconductor manufacturing companies may receive a refund of sales taxes on purchases of building materials, fixtures and equipment if the facility costs at least $50 million in Tier 1 counties and $100 million in Tier 2 and 3 counties.
• Sales of electricity to manufactures are taxed at a rate of 1.8%. Effective July 1, 2008, the rate will decrease to 1.4%; effective July 1, 2009 the rate will decrease to .8%; and effective July 1, 2010, sales of electricity to manufacturers for qualifying purposes will be exempt from sales and use tax.
• Sales of electricity and eligible business property to an internet service provider or web search portal business that invests at least $250 million in private funds are exempt from sales and use tax.
• Piped natural gas is exempt from sales and use tax but is subject to an excise tax. This tax rate is based on the number of therms of gas consumed in a month.
• Coal, coke and fuel oil used in manufacturing is taxed at 1 percent.
• Motor vehicles are exempt from sales and use tax but are subject to the highway use tax. Highway use tax is 3 percent of the retail value of the motor vehicle with a maximum tax of $1,500 per vehicle.
• Aircraft, boats, railway cars and mobile offices are taxed at 3 percent with a maximum tax of $1,500 per item.
• Custom computer software and computer software delivered electronically are exempt from sales and use tax.
• All telecommunications services are taxed at a rate of 6 percent.

Corporate Income Tax

In North Carolina, the corporate income tax rate is presently 6.9% and is levied on net income allocable to the state. Corporations doing business in at least one other state may apportion income according to the formula for franchise tax purposes.

Incorporation Fees

In North Carolina, a fee of $125 is payable to the Office of the Secretary of State upon filing articles of incorporation; a fee of $250 for application for certificate of authority.

Real Estate Transfer Tax

The statewide real estate transfer tax is assessed at the rate of $1.00 per $500 of the value of each deed, instrument, or writing by which any interest in real property is conveyed to another person.

Fuel Taxes

There is a statewide tax of 1% on manufacturing fuels, 3% on electricity or natural gas and 1% on manufacturing equipment.