North Carolina Issues Guidance Regarding Tax Rate Decrease

To address issues associated with the recently enacted tax rate decrease in North Carolina, the state has released a set of guidelines outlining the treatment of transactions occurring during the change. The state enacted legislation, effective December 1, 2006, that reduced the state tax rate for sales and use tax purposes from 4.5% to 4.25%. A second reduction from 4.25% to 4% will become effective July 1, 2007. The rate of tax applicable to a sale depends on when the service or property is delivered to the purchaser, not when the payment is made. Examples are available in the full text of the guidelines. (Important Notice: Decrease in State Sales and Use Tax Rate, North Carolina Department of Revenue, November 2006)

Posted on December 19, 2006