North Carolina applies a specific motor vehicle lease and subscription tax, levied on the privilege of using the state’s highways. This tax becomes applicable when a retailer chooses not to pay the highway use tax upon obtaining a certificate of title for a vehicle intended for a limited possession commitment. This commitment encompasses short-term leases or rentals, long-term leases or rentals, and vehicle subscriptions.
To clarify, here are the definitions of limited possession commitments:
- Short-term lease or rental: This includes vehicle sharing services and any lease or rental not classified as long-term or a vehicle subscription.
- Long-term lease or rental: A lease or rental agreement for at least 365 continuous days with the same person, excluding vehicle subscriptions.
- Vehicle subscription: A subscription grants the right to use and exchange vehicles from the agreement provider for a fee, but it excludes vehicle sharing services. Subscribers have exclusive use of a set number of vehicles at any one time during their subscription.
What is the Applicable Sales Tax Rate for Cars in NC?
The tax is calculated on the gross receipts from the vehicle’s limited possession commitment. The specific sales tax rate varies depending on the type of commitment:
| Type of Limited Possession Commitment | Sales Tax Rate* |
|---|---|
| Short-term lease or rental | 8% |
| Long-term lease or rental | 3% |
| Vehicle subscription | 5% |
| *Note: A maximum tax of $2,000 may be applied to certain commercial motor vehicles and recreational vehicles. |
Taxpayers are required to report this tax using Form E-500F, Motor Vehicle Lease and Subscription Tax Return.
How to Register for Car Lease and Subscription Tax in NC
Businesses liable for the motor vehicle lease and subscription tax must register through the online business registration portal. During registration, ensure to answer “Yes” to the question: “Will you provide motor vehicle leases or subscriptions?”
Where to Find More Information on NC Car Sales Tax for Leases and Subscriptions?
For further details and resources related to the motor vehicle lease and subscription tax, please refer to the following links:
- NC Department of Revenue Website
- Form E-500F, Motor Vehicle Lease and Subscription Tax Return
- Online Business Registration Portal
By understanding these regulations, businesses can ensure compliance with North Carolina’s sales tax requirements for car leases and subscriptions.
