North Carolina has issued a bulletin with guidance on the state’s dry-cleaning solvent tax. North Carolina imposes a privilege tax on dry-cleaning solvent retailers at a flat rate for each gallon of dry-cleaning solvent sold to a dry-cleaning facility. An excise tax is imposed on dry-cleaning solvent purchased for storage, use, or consumption by a dry-cleaning facility in North Carolina. The rate of the privilege tax and the excise tax is $10 per gallon of halogenated hydrocarbon-based dry-cleaning solvent and $1.35 per gallon of hydrocarbon-based dry-cleaning solvent. These taxes are applied in addition to any other taxes. These taxes should be collected and administered in the same manner as the state sales and use tax. The additional state sales tax paid when dry-cleaning solvent is sold at retail is a credit against the additional state use tax imposed on the storage, use, or consumption of the same dry-cleaning solvent. The dry-cleaning solvent tax should be listed separately on the invoice or billing document given to the customer and separately accounted for in the retailer’s records. A retailer must keep records that establish its dry-cleaning solvent tax liability. The dry-cleaning solvent tax is not a part of the sales price on which the sales and use tax is computed and the dry-cleaning solvent tax should not be computed on any sales or use tax due. Individuals who are required to collect and remit the dry-cleaning solvent tax must register using Form NC-DCSR, Registration Application for Dry-Cleaning Solvent Tax. The dry-cleaning solvent tax is to be paid and reported on Form E-500S, Dry-Cleaning Solvent Tax Return. Besides sales that a state cannot constitutionally tax (such as sales to the U.S. Government), no other exemptions apply to the tax. Dry-cleaning facilities that purchase dry-cleaning solvent from sellers who do not charge the dry-cleaning solvent tax must register with the Department of Revenue for a dry-cleaning solvent tax account and remit the tax due. The dry-cleaning solvent tax is set to expire on January 1, 2030. This bulletin is based on laws in effect as of January 1, 2023 and supersedes any Dry-Cleaning Solvent Tax Bulletins prior to January 1, 2023.
(Dry-Cleaning Solvent Tax Bulletin, North Carolina Department of Revenue, January 2023)