When invoicing your clients, it is important to know whether you should be charging sales taxes when bookkeeping for your small business in NC. Businesses that have income based on services such as HVAC contractors, kitchen remodelers, and carpet and flooring installers have, in the past, had the benefit of not having to charge sales tax. But in March of 2016, the North Carolina Department of Revenue changed the sales tax criteria making almost all service industries and businesses liable to add sales tax as part of their cost.
Navigating what services are taxed can be challenging, as there are a few exemptions across different industries. For example, income from advertising agencies and artists can be divided into two categories:
PROFESSIONAL ADVERTISING SERVICES - These services rely on expertise in strategy, media buying, and in graphic arts production in their specialized fields to secure and retain clients or engage in services such as market research, consulting, statistical analysis, etc. and are not subject to sales and use tax if the receipts are separately stated on the invoice.
RETAIL SALES BY ADVERTISING AGENCIES AND ARTISTS - When the service is to produce items such as magazines, handbills, brochures, programs, pamphlets or any other tangible personal property, such as signs, paintings, portraits, negatives, photographs, vinyl wraps, or certain digital property then they are considered retail sales and are liable for sales tax.
Just like with all other laws, there are certain exemptions that exist in the frame of who can collect and remit sales tax. Examples include businesses that:
Operate as a real property contractor
Installs tangible products or objects onto real property without selling the object or produce the work themselves
Provides services with respect to personal property
Provides services that is bought for the purpose of resale
Provides services that is covered under warranty
Provides services that is performed on types of aircrafts
Because there are many other terms of the sales tax requirements that differ from one industry to the next, it is always beneficial to go through the official documents and provisions so that you get a better idea of where your business stands. You can find this information in the most recent Sales and Use Tax Bulletin for North Carolina that was published on June 28, 2019 or call the Taxpayer Assistance and Collection Center at 1-877-252-3052 (toll free). Keep in mind that tax rules are frequently changed, added, amended, and/or left to expire – always check with your CPA or accountant regarding the most current tax rules and how they apply to your specific tax issue.
Do you need bookkeeping and sales tax payment services for your small business? Sprout Bookkeeping operates in Raleigh, NC and can provide bookkeeping to keep you on top of your books, so you can focus on what counts - operating your business.
Sprout Bookkeeping’s blog is intended for educational purposes and provides general information about business related topics. It is not intended to provide professional advice. The blog and website, including all contents posted by the author(s) as well as comments posted by visitors, should not be used as a substitute for competent counsel from a qualified advisor in your state.