What is the taxation of digital services?
In North Carolina, digital services are subject to taxation just like tangible goods, such as clothing and electronics. The North Carolina Department of Revenue defines digital services as “non-tangible, electronically delivered services.” This includes the sale of digital products, such as downloadable music or videos, online gaming, or streaming services. When a North Carolina consumer purchases digital services, the seller must collect the applicable state sales tax from the customer, just as they would with tangible goods. The digital services tax rate is the same as the rate for other goods and services in the state, which is currently 4.75%. Additionally, digital sellers must register with the North Carolina Department of Revenue and report the sales and the taxes they collect from customers. The Department then distributes the taxes to the respective cities and counties. Otherwise, the seller may be liable for back taxes and penalties. In short, digital services are subject to taxation in North Carolina just as with tangible goods. The seller must collect the tax from customers, register with the Department of Revenue, and report the sales and taxes collected to the Department. As long as digital sellers are aware of these obligations, they can remain compliant with the state’s International Tax Law.
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