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In the state of North Carolina, only computer software which meets certain descriptions is considered to be exempt. Sales of custom software - delivered on tangible media are exempt from the sales tax in North Carolina. Sales of custom software - downloaded are exempt from the sales tax in North Carolina.
Ideally, all software purchases should be taxable to final users and exempt for business users. Instead, states tax some kinds of software and exempt others, based on whether it is customized or off-the-shelf and whether it is on CD or downloaded, all silly distinctions for tax purposes.
But, in most, it's a mixed bag. California exempts most software sales but taxes one type: canned software delivered on tangible personal property an actual object you can touch or hold, such as a disc. Nebraska taxes most software sales with the exception of one type: SaaS.
Online educational content is exempt from North Carolina sales tax.
The North Carolina Department of Revenue issued a private letter ruling, concluding that subscription fees for a Software as a Service (SaaS) product are non-taxable.
In North Carolina, Gross Receipts Tax is an Excise Tax. Excise Tax is defined by the Internal Revenue Service as taxes paid when purchases are made on a specific good. A specific good can be: A prepared food, or a prepared beverage.
Effective March 1, 2016, N.C. imposes a sales tax on repair, maintenance, and installation services. Optional computer software maintenance contracts with respect to prewritten software that only provide support services that meet the definition of repair, maintenance, and installation services are fully taxable,
North Carolina generally does not require sales tax on Software-as-a-Service.
The sales price of or the gross receipts derived from a service contract sold at retail is subject to the general 4.75% State, applicable local (2.00% or 2.25%), and applicable transit (0.50%) rates of sales and use tax. Service contracts are taxed in accordance with N.C. Gen. Stat. § 105-164.4I.
Prescription Medicine, groceries, and gasoline are all tax-exempt. Some services in North Carolina are subject to sales tax.