North Carolina Business Taxes at a Glance
North Carolina has steadily lowered its taxes for more than a decade. The individual income tax is a flat rate that fell again in 2026, and the corporate income tax is on a schedule to reach zero. One business tax remains firmly in place: the franchise tax on corporations' net worth. BOMCAS helps North Carolina individuals and businesses plan around these changes and file correctly.
Individual Income Tax
North Carolina taxes income at one flat rate, starting from federal adjusted gross income with state additions and deductions. The rate was reduced again for 2026, and state law sets out further reductions that depend on revenue conditions. North Carolina uses its own standard deduction, and its child deduction varies with income.
Retirement income is treated differently depending on the source. Social Security is not taxed. Certain military retirement pay is deductible, and some government retirees who had vested benefits before August 12, 1989, may exclude those benefits under the Bailey decision. Other pensions are generally taxable. We prepare North Carolina returns and apply these rules correctly.
Corporate Income Tax Phase-Out
North Carolina's corporate income tax rate is being phased down each year and is scheduled to reach zero after 2029. Corporations still file returns and pay tax on apportioned income during the phase-down, using a single sales factor with market-based sourcing.
As the rate falls, the timing of income and deductions affects tax owed. Accelerating deductions or deferring income can shift tax between years with different rates. We prepare corporate returns and model these timing questions.
The Franchise Tax Continues
North Carolina's franchise tax is separate from the income tax and is not being phased out. C corporations and S corporations pay it on a base tied to their net worth, generally calculated from capital stock, surplus, and undivided profits apportioned to North Carolina, with a minimum and a lower maximum for S corporations. LLCs are generally not subject to the franchise tax unless they elect to be taxed as corporations.
The franchise tax is reported with the corporate return and is due even when a corporation has little income. We calculate it with the income tax and keep the equity accounts accurate so the base is correct.
Taxed Pass-Through Entity Election
North Carolina partnerships and S corporations can elect to pay tax at the entity level as a taxed pass-through entity, with owners receiving a credit or exclusion on their returns. The election must be made on a timely filed return and can affect nonresident owners differently. We evaluate the election each year and handle the filings.
Sales and Use Tax
North Carolina's sales and use tax combines a state rate with county rates and, in some counties, transit taxes. Several services are taxable, including repair, maintenance, and installation services for tangible personal property and motor vehicles. Food for home consumption is exempt from the state tax but subject to a reduced local tax. We register businesses, track rates by county, file returns, and review use tax on purchases.
County Occupancy and Prepared Food Taxes
Many North Carolina counties and cities levy room occupancy taxes on hotels and short-term rentals, and some counties also tax prepared food and beverages. These local taxes are often filed with the county or city, not the Department of Revenue, and rules differ by place. Restaurants, hotels, and rental owners in places like Charlotte, Raleigh, Asheville, and the Outer Banks may file several local returns. We help register and file them.
Annual Reports
North Carolina corporations and LLCs file an annual report with the Secretary of State. The report is due by April 15 for most entities. Missing it can lead to administrative dissolution or revocation of authority to do business. We track due dates and help gather the information.
Payroll and Form NC-4
North Carolina employers withhold state income tax and report unemployment insurance to the Division of Employment Security. Employees use Form NC-4 for withholding. The 2026 rate change affected withholding tables. We process payroll, file the periodic state reports, and reconcile them to the general ledger.
Banks, Biotech, Furniture, Farms, and Military Families
- Banking and financial services in Charlotte: multistate employees and apportionment
- Research Triangle technology and life sciences: equity compensation and research credits on federal returns
- Manufacturing, furniture, and textiles: inventory, fixed assets, and the franchise tax
- Agriculture: tobacco, poultry, hogs, and sweet potatoes, with farm reporting and exemptions
- Military communities: retirement income rules and multistate moves
Relocating From the Northeast
Many people move to Charlotte, the Triangle, and the coast from New York, New Jersey, and other higher-tax states. New York in particular may review whether a move was complete if you keep an apartment, business, or family ties there. We prepare the North Carolina part-year return and the departure-year return in your former state, and we help you keep the records that support the change.
Books With Accurate Equity Accounts
North Carolina bookkeeping should keep accurate equity accounts for the franchise tax, track sales by county for sales tax, and record service revenue that may be taxable. We set up the chart of accounts and monthly close to provide these numbers.
Working With BOMCAS in North Carolina
Corporations timing income during the rate phase-down, S corporations calculating franchise tax, and new residents arriving from the Northeast can contact BOMCAS for a remote review. Over time, this section will hold pages for specific North Carolina cities and services. See the BOMCAS home page and our United States services. This overview is general information; your own filings depend on your facts.
Talk to BOMCAS About Your North Carolina Taxes
Have a question about your North Carolina filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.