Taxes

Corporate Tax Rates and Fees

North Carolina corporations and other companies doing business in the state are subject to state income tax. The corporate income tax rate is 5 percent in 2015, dropping to as low as 3 percent in 2017 if state revenue goals are met. All corporations operating in the state are levied a franchise tax at the rate of $1.50 per $1,000 of the largest of three alternative bases:

  1. The amount of the capital stock, surplus and undivided profits apportionable to the state.
  2. 
Fifty-five percent of appraised value of property in the state subject to local taxation.
  3. The book value of real and tangible personal property in the state less any debt outstanding that was created to acquire or improve real property in the state. Book value may be computed by use of the same depreciation methods as are permitted for federal income tax purposes.

The minimum franchise tax is $35. Franchise tax and income tax are reported on the same return.

Occupational license taxes are levied by the county and city government on a variety of businesses. These fees vary with the type of business and volume of sales.

Though not a tax, most states require an insurance fee be paid on a portion of taxable wages. This fee varies with each business based on its history of unemployment claims. North Carolina requires a fee of 1.2 percent of the first $19,700 in wages paid per employee for new firms operating within the state. Existing firms are charged a rate from 0-6.84 percent of the first $19,700 in taxable wages; the average rate is 1.2 percent.

Personal Taxes

Charlotte and Mecklenburg County offer a comparatively uncomplicated system of taxation. Because the city and county jointly operate one tax department, taxpayers are only subject to a single payment. Charlotte has the 17th lowest residential property tax rates compared to the largest city in each state.

Property Tax (Real)

Real property is assessed at 100 percent of the fair market value and is assessed every four to eight years. Rental property is taxed at its full assessment. Both business and individuals are taxed at the same rate.

Property located within the corporate limits of the city of Charlotte is taxed by both city and county. A police service district tax of $0.1937 is applied to the unincorporated area of the county. There is no state of North Carolina tangible property tax. Detailed property tax examples can be downloaded here.


Income Tax

All residents of the state of North Carolina and some nonresidents are subject to personal income taxes. In 2013, the state of North Carolina passed a flat tax rate for everyone, regardless of income. For tax year 2014, the income tax rate was 5.8 percent. For tax year 2015, the income tax rate is 5.75 percent. For more information on North Carolina personal income tax, visit dor.state.nc.us/taxes/individual.

Sales Tax

Mecklenburg County’s sales tax rate of 7.25 percent is comprised of a 4.75 percent state tax plus, a 2 percent local tax and a .5 percent tax for public transit. Additional taxes of 1 percent on prepared food purchases and 8 percent on hotel room occupancy rates are collected locally.

Certain goods and services are exempt from state and local sales and use tax but covered under other taxes. These include:

  • Foods purchased for home consumption, which are taxed at a rate of 2 percent. Alcoholic beverages, soft drinks and candy are not included in this exemption 
  • Motor vehicle sales, which are covered under the highway use tax of 3 percent of the retail value of the automobile

No sales tax is levied on the following services [1]:

  • Automobile maintenance and parts installation
  • Medical office visits
  • Some prescription drugs
  • Haircuts
  • Veterinarian visits
  • Pet grooming

[1] The following list may not be comprehensive and is subject to change given future legislative decisions. For more information, visit the North Carolina Department of Revenue’s website at http://www.ncga.state.nc.us/gascripts/statutes/statutelookup.pl?statute=105-164.13


Motor Vehicle Registration

The state’s annual registration license fee is $28 per private passenger vehicle and private truck less than 4,000 pounds. In 2013, North Carolina began collecting vehicle property taxes along with registration renewal fees. For more information on the Tax and Tag Together program, please visit ncdot.gov.