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Sales Tax CPA discusses NC Form E500-J, Machinery, Equipment, and Manufacturing Fuel Tax | NC Sales and Use Tax

Sales tax CPA Wilmington NC discusees NC Form E500-J

Gary Bode, CPA: NC has multiple varieties of sales tax. For a free phone consult, call 399-2705.

Sales tax CPAs deal with more than just the standard cash register variety of sales tax the public sees most. Like Machinery, Equipment, and Manufacturing Fuel Tax, reported on NC Form E500-J, for example.

Let’s examine NC Sales and Use Tax from the perspective of the sales tax CPA for Wilmington NC Manufacturing, or WM, our example company;

  • WM primarily buys parts and raw materials, and then assembles them into custom production machines, which they sell to other manufacturers.
  • WM also buys and resells widgets, mostly to NC customers.

“Sales Tax requires companies to perform considerable amounts of work for NC at their own expense.”
– Gary Bode, Sales Tax CPA

The process starts by registering with the NC Department of Revenue (NC DOR) for a nine digit ID number. This number identifies WM for:

  • Income Tax Withholding.
  • Sales Tax.
  • Use Tax.
  • Machinery, Equipment, and Manufacturing Fuel Tax.

An online application uses the NC-BR form. The local Wilmington NC office is on Jackyl Drive off Randall Parkway, upstairs from the IRS. In my opinion, they are extremely customer oriented and professional.

NC Form E500-J, Machinery, Equipment, and Manufacturing Fuel Tax

Buying Componenst for Manufacturing Machines

WM buys component parts from various vendors to build its custom production machines. WM’s sales tax CPA provides these vendors with a NC DOR form E595-E, Streamlined Sales Tax Agreement Certificate of Exemption. This exempts WM from paying the normal NC Sales Tax on these component materials when purchased. Instead, WM fills out NC Form E500-J, Machinery, Equipment, and Manufacturing Fuel Tax every month and remits a 1% tax (1% of the cost of these purchases during the month). A Cost of Goods account in QuickBooks aggregates this expense to help with compliance.

Selling Completed Machines

When WM sells a machine, they collect no sales tax from their customers. Why? Because, the customers provide WM with their own NC E595E Certificate of Exemption.

Buying and Re-Selling Widgets in NC

The widget sales of WM are more problematic. Some of these customers provide WNF with a NC E595-E and thus pay no NC Sales Tax. But other customers do pay NC sales tax. So the CPA sets up a sales tax item in Quick Books, through the Invoicing feature, that aggregates Sales Tax (on sales that WM collects Sales Tax on). So the CPA can grab that monthly amount straight off a Quick Books report. This collected tax is held in trust by WM for the NC DOR.

Out of State Purchases – NC Use Tax

WM sometimes buys things online from another state, and the sales tax CPA has to track these purchases IF the vendor did not collect NC Sales Tax. Like, say, a printer, for example. NC DOR has recently cracked down on these types of interstate purchases since a) they miss out on collecting the sales tax and b) the amount of these purchases has increased dramatically in recent years. So, WM has to pay Use Tax to NC on the printer because no NC Sales Tax was collected. A true compliance headache: extra work for WM to comply on reporting and paying taxes.

So the sales tax CPA must:

  • Ascertain the Sales Tax WM collected for the month on Widget sales.
  • Calculate the Use Tax on interstate purchases where no NC Sales Tax was paid.
  • Timely report these amounts on the Sales and Use Tax form.
  • Timely remit the tax.

Sales and Use Tax Traps

Sales taxes are Held in Trust, meaning NC considers it a crime to not remit it. There are both non-filing penalties, of 5%, and non-penalties of 10% per month. The penalties then impede cash flow and bring undesirable attention from the taxing agencies

We’re a NC Sales Tax CPA firm with a virtual office to serve all NC. Of course we provide other services too. Read any of the hundreds of postings on this website to get a feel for out expertise and proactive attitude. For a free phone consult, call us at (910) 399-2705 .

2 comments to Sales Tax CPA discusses NC Form E500-J, Machinery, Equipment, and Manufacturing Fuel Tax | NC Sales and Use Tax

  • jason lemons

    I have some questions regarding sales and use tax. I recently found out that I should have been Charging tax on prepaid wireless service that we sell in our store. I need some assistance with filing amended sales and use tax to reflect our Wireless sales for the year 2014. Can you please call when u get a second 9103099877

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