North Carolina Use Tax: Rate, Exemptions, and How to File

North Carolina use tax is what you owe the state when you buy something for use in North Carolina and the seller didn’t collect the full sales tax. The rate matches the combined state and local sales tax rate in your county, which runs from 6.75% to 7.50%, and most individuals report and pay it once a year on Form D-400 by April 15.1North Carolina Department of Revenue. Consumer Use Tax

When You Owe Use Tax

Under N.C. Gen. Stat. 105-164.6, use tax applies to three categories of purchases made for storage, use, or consumption in North Carolina: tangible personal property, certain digital property, and taxable services.2North Carolina General Assembly. North Carolina Code 105-164.6 – Complementary Use Tax Physical goods like furniture, electronics, and clothing are the obvious cases. Digital property covers items like e-books, downloaded software, and streaming subscriptions. Taxable services include things like repair work or installations performed on tangible property.

The obligation lands on you as the buyer whenever a retailer, remote seller, or marketplace facilitator fails to collect the right amount. In practice, that happens less often than it used to. North Carolina now requires remote sellers with more than $100,000 in gross sales to the state during the previous or current calendar year to register and collect sales tax.3Streamlined Sales Tax. Remote Seller State Guidance Amazon, Walmart, eBay, and other large online retailers collect North Carolina tax at checkout.

The purchases that still create a use tax bill tend to be:

  • Orders from smaller online sellers that fall below the collection threshold.
  • Purchases from private individuals of taxable items, such as through Craigslist or Facebook Marketplace.
  • Orders from international sellers.
  • Items you bought in person in another state (or a state with a lower rate) and brought back to North Carolina.1North Carolina Department of Revenue. Consumer Use Tax

The Rate You Pay

The use tax rate mirrors the sales tax rate. North Carolina’s state rate is 4.75%, and each county adds a local rate on top.4North Carolina Department of Revenue. Current Sales and Use Tax Rates The combined rates currently break down this way:

  • 6.75% in most counties, including Guilford, Henderson, Iredell, and Wake.
  • 7.00% in a large group of counties, including Buncombe, Cumberland, Davidson, Forsyth, Gaston, and Mecklenburg (through June 30, 2026).
  • 7.50% in Durham County, which includes a transit tax.

Mecklenburg County will add an additional 1% local rate effective July 1, 2026, raising its combined rate.4North Carolina Department of Revenue. Current Sales and Use Tax Rates The county where you first use or store the item sets your rate, which isn’t always the county where you live. Shipping, handling, and delivery charges tied to a taxable purchase are also subject to use tax.5North Carolina Department of Revenue. Frequently Asked Questions About Use Tax

Three categories follow separate rules. Qualifying food (generally unprepared groceries) is taxed at only the 2% local rate; the state rate and transit rates don’t apply.6North Carolina Department of Revenue. Food, Non-Qualifying Food, and Prepaid Meal Plans Boats are taxed at a flat 3% with a maximum of $1,500 per boat. Aircraft are taxed at 4.75% with a maximum of $2,500 per aircraft.7North Carolina Department of Revenue. Instructions for Form E-555, Boat and Aircraft Use Tax Return Boats or aircraft bought from a private individual who isn’t in the business of selling them are not subject to use tax.

Credit for Tax Paid to Another State

If you already paid sales or use tax to another state on a purchase, you can claim a credit against what you owe North Carolina, so you only owe the difference.5North Carolina Department of Revenue. Frequently Asked Questions About Use Tax Pay 5% on a $500 item in another state when your North Carolina county rate is 7%, and you owe the remaining 2%, or $10.

Two limits matter. Only the other state’s state-level tax counts; you cannot claim credit for another state’s local sales tax. And value-added tax paid to a foreign country does not offset North Carolina use tax at all. A 20% VAT on an overseas purchase gets you no credit here.

What’s Exempt

If a purchase is exempt from sales tax in North Carolina, it’s also exempt from use tax. The exemption list under N.C. Gen. Stat. 105-164.13 is long, but the categories most people ask about include:8North Carolina General Assembly. North Carolina Code 105-164.13 – Exemptions and Exclusions

  • Prescription drugs, over-the-counter drugs sold on prescription, and insulin.
  • Prosthetic devices, and mobility-enhancing and durable medical equipment sold on prescription.
  • Breast pumps, including repair parts, kits, and collection and storage supplies.
  • Food and products lawfully purchased with SNAP benefits.

How to File and Pay

How you report depends on the type of purchase and whether you file a state income tax return.

Most residents report use tax on Form D-400, the state individual income tax return. A dedicated line lets you enter the total owed on non-business purchases, excluding boats, aircraft, and food at the reduced rate.1North Carolina Department of Revenue. Consumer Use Tax If you’re not required to file D-400, you use Form E-554, the Consumer Use Tax Return. Form E-554 is also where use tax on qualifying food goes, whether or not you file an income tax return.9North Carolina Department of Revenue. Instructions for Form E-554, Consumer Use Tax Return Both are due by April 15 of the year after the purchase.10North Carolina Department of Revenue. NCDOR Urges Taxpayers to File Before April 15 Deadline

Boats and aircraft are reported on Form E-555, which is due by the 20th of the month after the month of purchase.7North Carolina Department of Revenue. Instructions for Form E-555, Boat and Aircraft Use Tax Return That deadline is much shorter than April 15, so it’s easy to miss.

Electronic filing is available through the Department of Revenue’s website. An extension to file the income tax return does not extend the deadline to pay. You need to estimate and pay any tax due by April 15 to avoid penalties, even if you file the return later.10North Carolina Department of Revenue. NCDOR Urges Taxpayers to File Before April 15 Deadline

If You Don’t Have Records

If you know you made some untaxed purchases during the year but didn’t track them, the D-401 individual income tax instructions include a consumer use tax table. The table estimates your use tax based on the North Carolina taxable income shown on Line 14 of Form D-400.11North Carolina Department of Revenue. North Carolina Individual Income Tax Instructions The amounts are modest for most filers. A filer with $30,000 in taxable income owes about $20 under the table. Filers with taxable income above $45,200 multiply their income by 0.000675 instead of using the table.

The table is a convenience, not a ceiling. If you made large untaxed purchases and have the records to prove it, calculate the actual tax owed. Using the table when you know the real amount is higher can be treated as underreporting.

Penalties, Interest, and the Lookback Period

Missing the deadline triggers two penalties that can stack. Failure to file costs 5% of the tax due for each month or partial month the return is late, up to 25%.12North Carolina General Assembly. North Carolina Code 105-236 – Penalties Failure to pay adds a flat 5% of the unpaid tax. Interest accrues daily on any unpaid balance from the original due date until it’s paid.

If you file under an extension, the failure-to-file penalty runs from the extended due date, but the failure-to-pay penalty still applies from the original April 15 deadline unless you paid at least 90% of the total tax due by that date.13North Carolina Department of Revenue. Penalties and Fees Overview

The Department of Revenue generally has three years from the later of your return’s due date or the date you filed to assess additional tax.14North Carolina General Assembly. North Carolina Code 105-241.8 – Statute of Limitations There’s a serious exception: if you never filed a return, filed a fraudulent one, or attempted to evade the tax, no statute of limitations applies, and the Department can assess at any time. Filing a return, even one that turns out to be short, at least starts the three-year clock. Ignoring use tax entirely leaves the window open indefinitely.

Keep invoices, receipts, and shipping confirmations for any purchase where you might owe. Since North Carolina’s assessment window generally mirrors a three-year period, holding records for at least three years after filing is a reasonable minimum, and longer if you didn’t file at all.