Taxes and Utilities
Taxes
Citizens and businesses in North Carolina enjoy one of the more moderate tax structures in the country. Based on per capita tax burden, North Carolina ranked 32nd in the nation in the 2003 fiscal year.
This can be attributed, at least in part, to the fiscally conservative mode in which state government operates.
In addition, North Carolina is distinguished by the taxes which it does not impose. There are no inventory taxes, and the state intangibles tax (on receivables and securities) was repealed with the 1995-96 tax year.
Companies and individuals in Winston-Salem/Forsyth County also benefit from a lack of local payroll taxes and some of the lowest property tax rates among urban areas in the Southeast region. At the local level, Winston-Salem is one of a handful of cities in the entire nation to consistently earn a AAA rating for its municipal debt. Forsyth County also enjoys a AAA debt rating.
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Local Property Tax Rates
Unemployment Compensation and Workers Compensation
Employment and Training Tax Credits (William S. Lee Tax Credits)
Jobs Creation Tax Credit
Worker Training Tax Credit
Investment Tax Credit
Business Tax Credit
State Franchise Taxes
Corporate Income Tax
Incorporation Fees
Real Estate Transfer Tax
Occupational/Business License Taxes
Fuel Taxes
Local Property Tax Rates
Property taxes in North Carolina are assessed by each county. Property is assessed at 100% of appraised value, which is determined every four years in Forsyth County. The 2006-2007 property tax rate for Forsyth County is $0.666 per $100 of valuation. Within Winston-Salem City limits, there is an additional assessment of $0.485 per $100 of valuation. There are no school district taxes in Forsyth County, nor is there a state-level property tax. Manufacturers and wholesalers’ inventories are excluded from property taxation.
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Source: North Carolina Department of Revenue, Tax Research Division. City rates are assessed in addition to county rates when property is located inside city limits.
Property used to reduce air or water pollution receives special treatment from a taxation standpoint, if it meets requirements established by the Board of Environmental Management or a local air pollution control program. Items meeting the requirements are exempt from property tax, and are charged sales tax at a rate of 1% as “accessory” to manufacturing machinery.
Unemployment Compensation and Workers Compensation
See the Labor Force section of this report for details.
Employment and Training Tax Credits (William S. Lee Tax Credits)
- (All tax credits may be used against either the Corporate or Franchise Tax).
- As of January, 2002, an application for any William S. Lee tax credit is not required.
- Tax credit enhancements are available for companies located in designated Development Zones.
- In Winston-Salem, the Development Zone, increased the job creation tax credit by $4000 per job
Jobs Creation Tax Credit – (Forsyth County) $500 per full-time job created. ($4500 in Development Zone)
Jobs eligible: Manufacturing, processing, warehousing, distributing and data processing
Worker Training Tax Credit: up to$500 per employee trained. Must provide training to 5 or more employees during the taxable year to be eligible for a 50% tax credit.
Investment Tax Credit – Tax Credit of 7% of amount over the applicable threshold of $2,000,000 for investment in new machinery. Used in:manufacturing, processing, data processing, warehousing, or distribution.
Business Tax Credit- Businesses in NC eligible for a 4.5% credit on tangible personal property purchased and placed in service in NC. Credit capped at $4,500.
*For more information visit the NC Commerce website at www.nccommerce.com/finance
State Franchise Taxes
NC franchise taxes levied at $1.50 per $1,000 of the largest of the following:
- Amount of capital stock, surplus and undivided profits apportionable to the state;
- 55% of appraised value of property in NC subject to local taxation;
- Book value of real and tangible personal property in the state less any debt outstanding that was created to acquire or improve real estate in NC.
The formula used by manufacturing and merchandising firms to determine capital apportionable to the state is the total of the following ratios divided by four:
| Payrolls in NC | Value of Tangible Property in NC* | Sales of Merchandise Shipped to NC Customers | ||
| + | + | |||
| Total Payrolls | Value of Tangible Prop. Used Wherever Located | Total Sales | ||
| (4) | ||||
*In computing property ratio, owned property is valued at original cost and leased property is valued at 8 x the annual rental rate
Corporate Income Tax
In North Carolina, the corporate income tax rate is presently 6.9 % and is levied on net income allocable to the state. Corporations doing business in at least one other state may apportion income according to the formula for franchise tax purposes.
In determining net income, North Carolina allows corporations to deduct operating expenses, depreciation, taxes paid or accrued in the year (except taxes on income), contributions not to exceed 5% of net income, income from tax exempt securities, payments to employee pension or profit sharing trusts, current year losses and net economic losses as defined in the law of any of the five preceding years. North Carolina accepts depreciation as permitted on federal tax returns.
A franchise tax is levied on business corporations including those electing federal S Corporation status, at the rate of $1.50 per $1,000 of the largest of three alternate bases. These bases are a) the amount of capital stock, surplus, and undivided profits apportionable to the State; or b) fifty-five percent of the appraised value of property in the State subject to local taxation; or) the book value of real and tangible property in the State less any debt outstanding which was created to acquire or improve real property in the State. Book value may be computed by the use of the same depreciation methods as are permitted for federal income tax purposes.
Franchise and income tax are reported on the same return.
Incorporation Fees
In North Carolina, a fee of $125 is payable to the Office of the Secretary of State upon filing articles of incorporation; a fee of $250 for application for certificate of authority.
Real Estate Transfer Tax
The statewide real estate transfer tax is assessed at the rate of $1.00 per $500 of the value of each deed, instrument, or writing by which any interest in real property is conveyed to another person.
Occupational/Business License Taxes
State business license taxes are assessed on businesses based on the type of business activity. Tax rates vary depending on the type of business.
In Winston-Salem, local occupational (business license) taxes may also apply. For area manufacturers or wholesalers, the maximum annual fee is $2,500 and is based on gross sales/receipts.
The following table reflects local business license tax rates.
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Fuel Taxes
There is a statewide tax of 1% on manufacturing fuels, 3% on electricity or natural gas and 1% on manufacturing equipment.
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