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                                     Form E-500 Sales and Use Tax Return 
                                           General Instructions 
 
1.  Use Form E-500 to file and report your State, local, and transit sales and use taxes except certain sales and use taxes 
 required to be reported on  Form E-500E.  Taxpayers  who have a filing frequency  of Monthly with Prepayment are 
 required to file Form E-500 via our Online Filing and Pay System via our website, www.dornc.com. 
2.  A tax return must be filed for each return period by the due date indicated or a delinquent notice for failure to file is issued by 
 the Department.  The tax shown due must be paid with the return or penalty and interest will be assessed by the Department.  
 If you do not owe any tax for a filing period, you must file a return and enter zero (0.00) on Line 21.  Do not write “No Tax Due” 
 or any similar text on the return.  
3.  Complete the sales and use tax return in its entirety on your computer and print the return. 
4.    If you discontinue business operations or sell your business, complete Form NC-BN, Out-of-Business Notification and mail it 
 separate from any returns to the Department at the address shown on the form. 
5.  Each return must be completed in full.  The total amount of receipts exempt from State tax should be included on Line 3.  
 Retail sales of taxable tangible personal property, services and digital property are subject to sales and use tax unless the 
 sales are specifically exempt from tax by statute or unless proper exemption documentation is provided by the purchaser to 
 the seller.   
6.  Purchases by a person to fulfill a lump sum or unit price real property contract entered into or awarded to a real property contractor 
 pursuant to a bid made prior to a local tax rate increase are subject to the local or transit rate in effect prior to the increase. 
7.  As of October 1, 2017, the local sales and use tax rate in all counties is 2% except the counties of Alexander, Anson, Ashe, 
 Buncombe, Cabarrus, Catawba, Cherokee, Cumberland, Davidson, Duplin, Durham, Edgecombe, Greene, Halifax, Harnett, 
 Haywood, Hertford, Jackson, Lee, Martin, Montgomery, New Hanover, Onslow, Orange, Pitt, Randolph, Robeson, Rowan, 
 Sampson, Surry, and Wilkes where the local sales and use tax rate is 2.25%.  The Department will publish notification if 
 other counties levy the additional 0.25% local sales and use tax. 
 Mecklenburg and Wake Counties have an additional 0.5% Transit tax for public transportation in addition to the 2% local sales and 
 use tax rate.  Durham and Orange Counties have an additional 0.5% Transit tax for public transportation in addition to the 2.25% 
 local sales and use tax rate. 
 A retailer or facilitator, as applicable, that is required to collect county tax should do so in accordance with N.C. Gen. Stat. § 
 105-164.4B.  
 The following general principles apply in determining where to source the sale of  most products and should be used to 
 determine the applicable local and transit rate of tax due on a retail sale.  Except as otherwise provided below, a service is 
 sourced where the purchaser can potentially first make use of the service:  
 (a)  When a purchaser receives a product at a business location of the seller, the sale is sourced to that business location.  
 (b)   When a purchaser or purchaser’s donee receives a product at a location specified by the purchaser and the location is not a 
      business location of the seller, the sale is sourced to the location where the purchaser or the purchaser’s donee receives the 
      product.  
 (c)   When  (a)  and  (b)  of  this  section  do  not  apply,  the  sale  is  sourced  to  the  location  indicated  by  an  address  for  the 
      purchaser that is available from the business records of the seller that are maintained in the ordinary course of the 
      seller’s business when use of this address does not constitute bad faith.  
 (d)   When (a), (b), and (c) of this section do not apply, the sale is sourced to the location indicated by an address for the purchaser 
      obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address 
      is available, when use of this address does not constitute bad faith.  
 (e)  When (a), (b), (c), and (d) of this section do not apply, including the circumstance in which the seller is without sufficient 
      information to apply the rules, the location will be determined based on the following:  
      •   Address from which tangible personal property was shipped,  
      • Address  from  which  the  digital  good  or  the  computer  software  delivered  electronically  was  first  available  for 
        transmission by the seller, or  
      •   Address from which the service was provided. 
 A florist wire sale is sourced to the business location of the florist that takes an order for the sale.   
 Periodic rental payments are sourced in accordance with N.C. Gen. Stat. § 105-164.4B(b).  
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 Taxable digital property is sourced to the county where the purchaser takes possession of the property or makes first use of 
 the property, whichever comes first. 
 An admission charge to an entertainment activity is sourced to the location where admission to the entertainment activity 
 may be gained by a person.  When the location where admission may be gained is not known at the time of the receipt of 
 the gross receipts for an admission charge, the sourcing principles in N.C. Gen. Stat. § 105-164.4B(a) apply. 
 Purchases and sales of advertising and promotional direct mail and other direct mail are sourced in accordance with N.C. 
 Gen. Stat. § 105-164.4E.  
 The retail sale of a “service contract” by a retailer or on behalf of a retailer by another person to a purchaser at a location in 
 this State is the location where the sale of the “service contract” is sourced provided the purchaser can potentially first make 
 use of the service at the location.  If the purchaser of the “service contract” cannot potentially make first use at the location 
 where the “service contract” is sold, the sale is sourced in accordance with N.C. Gen. Stat. § 105-164.4B(3), (4) or (5) based 
 on the hierarchy and available address. 
 Prepaid meal plans are sourced to the location where the food or prepared food is available to be consumed by the person. 
 The rental of an accommodation is sourced to the location of the accommodation. 
 If you collect county tax for one county and your business is located in the same county, enter the appropriate amounts on 
 the provided return.  If you are required to collect county tax for a county that your business is not located in or for more than 
 one county, you must complete Form E-536 and file with your sales and use tax return.  Form E-536 is available at the 
 Department’s website at www.dornc.com or may be mailed to you upon request. 
8.  Payment must be made in U.S. dollars by check or money order drawn on a U.S. (domestic) bank and payable to the North 
 Carolina  Department  of  Revenue  unless  you  have  been  previously  instructed  by  the  Department  to  make  payments 
 electronically.  Do not mail cash, stamps, or post dated checks with your return. 
9.  Sign each return and payment, unless you are required to file and pay electronically or you elect to file and pay online.  
                                                                   
                              How to Prepare Return: Specific Line Instructions 
 
Line 1 - NC Gross Receipts:   Enter the total amount of gross receipts from your business operations in North Carolina and 
 sourced to North Carolina.  Do not include any taxes collected in the amount you enter on Line 1.  You are not required to 
 include gross receipts from real property contracts. 
Line 2 - Sales for Resale:  Enter the total amount of sales of tangible personal property, services, or certain digital property sold 
 for the purpose of resale, sublease, or subrent.  Do not include this amount on Line 3 or elsewhere on the return. 
Line  3  -  Receipts  Exempt  From  State  Tax:   Enter  the  total  amount  of  sales  and  gross  receipts  exempt  from  State  tax.  
 Examples of exempt sales in N.C. Gen. Stat. §§ 105-164.13 and 105.164.13E include but are not limited to: 
 •  Sales in interstate commerce and direct sales to the U.S. Government    
 •  Vaccines, insecticides, feed, and items for animals or plants held or produced for commercial purposes 
 •  Food exempt under food stamp and supplemental food programs  
 •  Drugs required by federal law to be dispensed only on prescription and over-the-counter drugs sold on prescription 
 •  Sales of mill machinery   
 •  Food exempt from the general State rate of tax but subject to the local 2% rate of tax  
 •  Any receipts above the maximum taxable receipts of certain tangible personal property, such as boats or aircraft 
 •  Fifty percent (50%) of the sales price of a modular home or a manufactured home sold at retail, including all accessories 
      attached when delivered to the purchaser. 
Lines 4 through 7 - State Tax Calculation:  
 For  the  appropriate  line,  enter  under  the  column  “Purchases  for  Use”  the  total  purchase  price  of  any  taxable  tangible 
 personal  property,  service,  or  digital  property  purchased  inside  or  outside  the  State  for storage,  use,  or  consumption  in 
 North  Carolina  from  vendors  on  which  the  State  rate  of  tax  was  not  collected  by  the  vendors.    Do  not  include  tangible 
 personal property, services, or digital property purchased for resale and included in the amount entered on Line 2. 
 For the appropriate line, enter under the column “Receipts” the total amount of taxable receipts, rentals, and sales which are 
 subject to the State rate of tax, excluding the tax collected. 
 Compute the tax due at the applicable rate for each line and enter that amount under the column “Tax.” 
Line 4 -  General State Rate:  The State levies a 4.75% general rate of tax on the sales price of  taxable tangible personal 
 property, certain services, or digital property sold at retail and not subject to a reduced rate of tax.  Add the amounts entered 
 in the columns “Purchases for Use” and “Receipts.”  Compute the tax due on the total “Purchases for Use” and “Receipts” at 
 the 4.75% State rate and enter that amount under the column “Tax.” 
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 Items subject to the general State rate are subject to the applicable local and transit sales and use tax rate except for the 
 following:  a  manufactured  home,  a  modular  home,  an  aircraft,  and  a  qualified  jet  engine.    See  instructions  for  Lines  9 
 through 12 for more information on the applicable local and transit rates of tax.  
Line 5 – 3% State Rate:  The 3% State rate of tax with a maximum tax of $1,500 applies to the sales price of each boat sold at 
 retail, including all accessories attached to the boat when it is delivered to the purchaser.  Add the amounts entered in the 
 columns “Purchases for Use” and “Receipts” and compute the tax due on the total at the 3% rate and enter that amount 
 under the column “Tax.” 
Line 6 - Modular Homes:  Fifty percent (50%) of the sales price of each modular home, including all accessories attached when 
 delivered to purchaser, sold at retail is subject to the 4.75% State rate of tax only (not subject to the local and transit rates of 
 sales and use tax).  Add the amounts entered in the columns “Purchases for Use” and “Receipts.”  Compute the tax due on 
 the total “Purchases for Use” and “Receipts” at the 4.75% State rate and enter that amount under the column “Tax.” 
Line 7 - Mfg. Homes:  Fifty percent (50%) of the sales price of each manufactured home, including all accessories attached 
 when delivered to purchaser, sold at retail is subject to the 4.75% State rate of tax only (not subject to the local and transit 
 rates of sales and use tax).  Add the amounts entered in the columns “Purchases for Use” and “Receipts.”  Compute the tax 
 due on the total “Purchases for Use” and “Receipts” at the 4.75% State rate and enter that amount under the column “Tax.” 
Line 8 - 2% Food Rate:  A 2% local rate of tax applies to the sales price of food products that are exempt from State tax.  Add 
 the amounts entered in the columns “Purchases for Use” and “Receipts.”  Compute the tax due on the total “Purchases for 
 Use” and “Receipts” at the 2% Food rate and enter that amount under the column “Tax.” 
Line 9 - 2% County Rate:   See Number 7 under “General Instructions.”  Items subject to the general State rate (Line 4) are also 
 subject to the local rate of sales and use tax.  The local sales and use tax rate in all counties as of October 1, 2017 is 2% 
 (except Alexander, Anson, Ashe, Buncombe, Cabarrus, Catawba, Cherokee, Cumberland, Davidson, Duplin, Durham, 
 Edgecombe, Greene, Halifax, Harnett, Haywood, Hertford, Jackson, Lee, Martin, Montgomery, New Hanover, Onslow, 
 Orange, Pitt, Randolph, Robeson, Rowan, Sampson, Surry, and Wilkes).  The 0.5% Transit County sales and use tax rate 
 due on an item sourced to or for storage, use, or consumption in Mecklenburg or Wake Counties is reported on Line 11.   
 Under the column “Purchases for Use,” enter the total purchase price of any taxable tangible personal property, services or 
 digital property purchased for storage, use, or consumption in the county on which the 2% county tax is due and was not 
 paid.  This amount should include the amount in the column “Purchases for Use” on Line 4 except as noted for items under 
 instructions for Line 4. 
 Under the column “Receipts,” enter the total amount of taxable receipts, rentals, and sales subject to the 2% rate of county 
 tax excluding the amount of tax collected.  This amount entered should include those items in the column “Receipts” on Line 
 4 except for special circumstances.  Add the amounts entered in the columns “Purchases for Use” and “Receipts.”  Compute 
 the tax due on the total amount of “Purchases for Use” and “Receipts” at the 2% county rate and enter that amount under 
 the column “Tax.” 
Line 10 - 2.25% County Rate:  See Number 7 under “General Instructions.”  Items subject to the general State rate (Line 4) are 
 also  subject  to  the local  rate  of sales  and  use  tax  except  for the following:  a  manufactured  home,  a  modular  home,  an 
 aircraft, and a qualified jet engine.  This line should be used to report the 2.25% county tax effective in the counties of 
 Alexander, Anson, Ashe, Buncombe, Cabarrus, Catawba, Cherokee, Cumberland, Davidson, Duplin, Durham, Edgecombe, 
 Greene,  Halifax,  Harnett,  Haywood,  Hertford,  Jackson,  Lee,  Martin,  Montgomery,  New  Hanover,  Onslow,  Orange,  Pitt, 
 Randolph, Robeson, Rowan, Sampson, Surry and Wilkes if the item is sourced to or for storage, use, or consumption in one 
 of  these  counties.    The  0.5%  Transit  County  sales  and  use  tax  due  on  an  item  sourced  to  or  for  storage,  use,  or 
 consumption in Durham or Orange Counties is reported on Line 11. 
 Under the column “Purchases for Use,” enter the total purchase price of any taxable tangible personal property, services, or 
 digital property purchased for storage, use, or consumption in the county on which the 2.25% county tax is due and was not 
 paid.  This amount should generally include the amount in the column “Purchases for Use” on Line 4 except as noted for 
 items under instructions for Line 4. 
 Under the column “Receipts,” enter the total amount of taxable receipts, rentals, and sales subject to the 2.25% rate of county 
 tax excluding the tax amount collected.  This amount should include those items in the column “Receipts” on Line 4 except for 
 special circumstances.  Add the amounts entered in the columns “Purchases for Use” and “Receipts.”  Compute the tax due on 
 the total “Purchases for Use” and “Receipts” at the 2.25% county rate and enter that amount under the column “Tax.”  
Line 11 - 0.5% Transit County Rate:  See Number 7 under “General Instructions.”  Items subject to the general State rate (Line 
 4)  are  also  subject  to  the  0.5%  Transit  County  sales  and  use  tax  rate  if  the  item  is  sourced  to  or  for  storage,  use,  or 
 consumption in Durham,  Mecklenburg, Orange, or Wake Counties.  Two other counties are authorized to levy the 0.5% 
 Transit local rate but have not levied the tax as of October 1, 2017.   
 Under the column “Purchases for Use, ” enter the total purchase price of any taxable tangible personal property, services or 
 digital property purchased for storage, use, or consumption in Durham, Mecklenburg, Orange, or Wake Counties in which 
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 the 0.5% Transit County sales and use tax is due and was not paid.  This amount generally should include the amount 
 entered in the column “Purchases for Use” on Line 4 that applies to Durham, Mecklenburg, Orange, or Wake Counties and 
 on Line 9 or 10, as applicable. 
 Under the column “Receipts,” enter the amount of total taxable receipts, rentals, and sales which are subject to the 0.5% 
 rate of Transit County sales and use tax excluding the amount of tax collected.  Add the amounts entered in the columns 
 “Purchases for Use” and “Receipts.”  Compute the tax due on the total “Purchases for Use” and “Receipts” at the 0.5% rate 
 and enter that amount under the column “Tax.” 
Line  12  -  0.25%  Transit  County  Rate:  As  of  October  1,  2017,  no county  has levied  a  0.25%  Transit  County  Tax.    The 
 Department will publish notification if a county levies such.  Therefore, no amount should be entered on Line 12 unless 
 the Department publishes notification that a county levies such tax.  In the event a county levies the 0.25% local sales 
 and use tax, Line 12 should be completed in like manner as Line 11. 
Line 13 - Total State and County Tax: Add the amounts in the column “Tax” on Lines 4 through 12 and enter the sum. 
Line 14 - Excess Collections:  Enter any tax collected in excess of the total amount of tax computed to be due on taxable 
 receipts, rentals, and sales.  See N.C. Gen. Stat. § 105-164.11 for more information. 
Line 15 - Total Tax:  Add the tax amounts on Lines 13 and 14, and enter the sum. 
Line 16 - Penalty:  If a return is filed after the due date, add the failure to file return penalty of 5% per month of the tax 
 amount shown on Line 15 for each month, or fraction thereof, that the return is filed late.  The maximum failure to file return 
 penalty is 25% of the tax amount shown on Line 15.   
 If the tax was not paid when due, add the failure to pay tax when due penalty of 10% of the tax amount shown on Line 
 15.      
Line 17 - Interest - State and County:  If a return is filed after the due date and tax is due, compute interest on the total tax 
 amount on Line 15 from the time the taxes were due until paid.  The Secretary of Revenue establishes the interest rate on a 
 semiannual  basis.    The  interest  rate  is  5%  per  year  or  .417%  per  month  through  December  31,  2017.    Check  the 
 Department’s website or contact the Department for the interest rate in effect on or after January 1, 2018. 
Line 18 - Less Prepayment for This Period: (This line is for use by taxpayers remitting $20,000 or more in tax per month 
 who have made a prior prepayment for this period.)  If you are required to make a prepayment, you are required to file 
 an electronic return and you should not file a paper return. 
Line 19 - Prepayment for Next Period:  Taxpayers who are consistently liable for at least $20,000 a month in State and local 
 sales and use taxes must make a monthly prepayment of the next month’s tax liability.  The prepayment is due when the 
 monthly return is due.  The prepayment must equal at least 65% of any of the following:   
 (1)  the amount of tax due for the current month,  
 (2)   the amount of tax due for the same month in the preceding year, or  
 (3)  the average monthly amount of tax due in the preceding calendar year.  
 Penalties or interest will not be due on an underpayment of a prepayment if one of these three calculation methods is used.  
Line 20 - Less any Credit:  If you claim a credit for sales and use tax previously paid, enter the amount of tax claimed.  To 
 prevent  the  automatic  disallowance  of  a  credit  claimed  and  subsequent  issuance  of  an  assessment,  attach  a  detailed 
 explanation of the credit to your return.  If you are requesting a refund of an overpayment of tax, you are encouraged to file 
 Form E-588, Business Claim for Refund, in lieu of taking a credit on a sales and use tax return, but you will be required to 
 pay any tax shown due on the return. 
Line 21 - Total Due:  Enter the total amount due by adding Lines 15, 16, 17, and 19, and subtracting any prepayment amount 
 on Line 18 and any credit amount on Line 20 and pay this amount.  Do not fold your return or payment.        
Additional information about sales and use tax may be obtained from the Department’s website at www.dornc.com. 

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