Depending on the type of business, there are a variety of taxes a business in North Carolina to be aware of with the two of the most common being sales and self-employment.
North Carolina Sales Tax
Generally speaking, physical products sold at retail are taxable within North Carolina. So, if you sell a pair of shoes from your store, you would charge the customer sales tax (which varies depending on where your store is located.
Services in North Carolina are generally not taxable. So if you’re a lawn mowing company, you don’t have to worry about sales tax. Some businesses have a blend of both – say an auto repair shop where a vehicle with a broken alternator has the labor of replacing the part (which isn’t taxed) but the retail cost of the alternator is taxed.
Sales Tax Rates
The statewide tax rate in North Carolina is 4.75%. In most areas of North Carolina, local jurisdictions have added additional sales taxes that increase the tax owed by a seller. Additionally, some areas may have more than one district tax in effect. Sellers are required to report and pay the applicable district taxes for their taxable sales and purchases. The final sales tax rate is determined by the physical location of the business.
To find the amount of sales tax for a particular location, visit the North Carolina Department of Revenue.
North Carolina Self-Employment TaxesSelf-employed business owners (sole proprietors, partnerships or LLC's that elect to be taxed as a sole proprietorship or partnership) are required to pay income taxes, Social Security, and Medicare based on the profits generated by the business. Profits are determined before you draw compensation from the business (i.e. your draw or wages are not considered an expense of the business.) Once your liability for federal income tax and self-employment FICA exceeds $500, you will need to deposit the tax payments to the IRS (whether this happens in any one quarter or combination of quarters.)
AccountingAccounting is an essential, but often underestimated part of starting a business. Keeping complete, accurate records is important to the financial health of a business regardless of whether it’s a one-person operation or multinational corporation.
Having a clear picture of sales trends and the business’s financial position gives the business owner data for making decisions about financing, expansion, or other strategic steps.
The decision to handle accounting on your own versus hiring a bookkeeper or accountant is an important one that should be considered carefully. There will certainly be differences in cost and expertise but you should also consider how much additional time you will spend doing your accounting that could be better invested in growing your business.
While a bookkeeper may not be in the budget or even needed in the early stages, there are a number of ways to keep track of your businesses finances.
BasicAccountingHelp.com has free accounting spreadsheets and educational resources.