This upcoming weekend (Friday, August 6th through Sunday, August 8th) will be the annual “back-to-school” sales tax holiday for both North Carolina and South Carolina.   

North Carolina Sales Tax Holiday

Qualified items generally include clothing, footwear or school supplies that are individually priced at $100 or less, some instructional materials priced at $300 or less, sports equipment that is priced at $50 or less, computers prices at $3,500 or less, and some computer equipment priced at $250.  It does not apply to clothing accessories, jewelry, cosmetics, protective equipment, furniture or any item purchased for use in a business.  It also does not apply to computer equipment, such as monitors, unless they are purchased in a bundle with a computer system.   For a detailed list of items that are exempt during the North Carolina Sales Tax Holiday, click here (opens as .pdf).  For a list of frequently asked questions about the NC Sales Tax Holiday, click here (opens as .pdf).

South Carolina Sales Tax Holiday

Qualified items include certain clothing, footwear, school supplies, computers and computer software., bath wash clothes, blankets, bed spreads, bed linens, sheet sets, comforter sets, bath towels, shower curtains, bath rugs and mats, pillows, and pillow cases.  It does not apply to items such as  jewelry, cosmetics, eyewear, wallets, watches, furniture, rental of clothing.  It also does not apply to any items for use in a business.  A detailed list of items can be found here, on the South Carolina Department of Revenue’s website (opens as .pdf),   For a more detail questions and answers on the South Carolina Sales Tax Holiday, go here (opens as .pdf).

Other States

Sales Tax Holiday Information for Other States.

The Tax Foundation released a special report on Monday that indicates that the “Amazon Tax” laws signal business unfriendliness and will worsen short-term budget problems. Currently, four states (North Carolina, Colorado, Rhode Island and New York) have some form of a  law that require Companies that have “affiliates” in their states to collect sales tax from their customers in that state.

For those that may be unclear as to exactly what an affiliate is, let me explain it as simply as I can and use Amazon.com as an example.  Amazon allows other website owners to post links or advertisements to their products on their website. In exchange, Amazon pays those website owners a small commission on the products sales that this generates. Simply put, these website owners are basically providing a targeted advertising medium to Amazon. What the “Amazon Tax” law does is it requires Amazon (or other Internet retailers) to collect sales tax in a particular state, even if Amazon has no physical presence in that state.

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Sales and use tax has always been a confusing issue and every state has different laws to add to the confusion.  The general rule of thumb has been that if it is tangible, it is taxable.  Usually labor and services are not subject to sales tax.  Well, throw that rule out the window when it comes to digital property in North Carolina.

Effective for 2010, digital property is now taxable even if it is delivered electronically.  “Digital works” includes (1) an audio work; (2) an audiovisual work; (3) a book, a magazine, a newspaper, a newsletter, a report, or another publication; (4) a photograph or a greeting card.  These are some big changes and the issue has not been publicized much.

Sellers of these products should take note of the changes and begin to charge sales tax if they are required to collect in North Carolina.  Buyers should also beware — use tax may be due.  If the seller is not required to collect tax in NC and you as the purchaser are in NC, you should still remit the applicable tax as use tax.

For the full detail of the changes from the North Carolina Department of Revenue, please review the notice at http://www.dornc.com/taxes/sales/impnotice_digital_property09.pdf.

NC Sales Tax Increase goes into affect on Septemeber 1st.

Just a reminder that the North Carolina state sales tax rate will increase by 1% on Tuesday, September 1, 2009.  For Mecklenburg county and the Charlotte area, that means the new sales tax rate will be a whopping 8.25% on goods (9.25% for prepared foods/restaurants).  For those counties without special rates, the rate will increase to 7.75%. 

This special rate was put into effect by Governor Bev Purdue and is scheduled to end on July 1, 2011 — unless it gets extended…. 

You can still make a run for the border to neighboring York county where the rate continues to be 7%.  On large purchases, this could add up but make sure you are penny wise and not pound foolish — add the cost of gas to your analysis to see if it is worth it to make the drive.

For full details and rate changes by county, you can visit the NC Department of Revenue site at http://www.dornc.com/taxes/sales/rate_increase2009.html.