Form E-505 - 2007 Tax Law Changes printable pdf download

Form E-505 (9-07)

North Carolina Department of Revenue

Post Office Box 25000

Raleigh, North Carolina 27640-0001

To Registered Taxpayers:

This document lists the major changes made by the 2007 General Assembly to the taxes administered by the

Sales and Use Tax Division. Legislative changes supersede any information previously set forth in Sales and

Use Tax Administrative Rules or Technical Bulletins relating to any subject matter of the legislation. Part I lists

the changes to sales and use tax and privilege tax rates; Part II lists the remaining legislative changes. The

changes in both Parts are cited in order of effective date. A more detailed explanation of the legislative

changes is available in the 2007 Tax Law Changes, which is available on the Department’s website.

PART I: RATE CHANGES

Effective June 29, 2007

Temporary Extension of State General Rate

The additional 0.25% State sales and use tax was extended for one month. The additional 0.25% rate,

resulting in a total general State rate of 4.25%, was scheduled to expire on June 30, 2007. As a result, the

combined State and local sales and use tax remained at 6.75% in all counties except Mecklenburg; in

Mecklenburg County, the combined State and local sales and use tax remained at 7.25%. The legislation

providing for the temporary extension included a hold harmless provision for retailers for an over-collection

or under-collection of tax due to the extension of the 0.25% tax for the month of July 2007.

Temporary Extension of Combined General Rate

The combined general rate is the State’s general rate (4.25%) plus the sum of the rates of local tax

authorized for every county in the State (2.5%). Since the State general rate remained at 4.25%, the

combined general rate remained at 6.75%.

The combined general rate applies to sales of

telecommunications service, ancillary service, video programming service, and spirituous liquor.

Effective July 31, 2007

Permanent Extension of State General Rate

The additional 0.25% State sales and use tax was permanently extended. As a result, the total general

State rate remains at 4.25%. The combined State and local sales and use tax remains at 6.75% in all

counties except Mecklenburg; in Mecklenburg County, the combined State and local sales and use tax

remains at 7.25%. Additional legislation included a hold harmless provision for retailers for an over-

collection or under-collection of tax due to the extension of the 0.25% tax for the month of August 2007.

Permanent Extension of Combined General Rate

Since the State general rate remains at 4.25%, the combined general rate remains at 6.75%.

Effective October 1, 2007

Decrease in Rate for Electricity Sold to Manufacturers and Farmers

The rate of tax on the sale of electricity to a manufacturer for use in connection with the operation of the

industry or plant is reduced from 2.6% to 1.8%. The rate of tax on the sale of electricity to a farmer to be

used for any farm purpose other than preparing food, heating dwellings, and other household purposes is

reduced from 2.83% to 1.8%. The electricity must be measured by a separate meter or another separate

device.

Decrease in Rate for Manufacturing Fuel

The privilege tax imposed on a manufacturing industry or plant that purchases fuel, other than electricity or

piped natural gas, to operate the industry or plant is reduced from 1% to 0.7%.

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Form E-505 - 2007 Tax Law Changes

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