ECONOMIC DEVELOPMENT

Tax Information Overview

Local Property Tax
Real estate and tangible personal property, including machinery and equipment, are subject to city and/or county ad valorem taxation. Real property is appraised and assessed for taxation on the basis of 100% of true market value. Appraisals are made every eight years by "in house appraisers". The last appraisal was effective January 1, 1993. Household tangible personal property in the personal residence of the owner is exempt from property taxation. Property owners pay one of two different tax rates. For the most current tax information, contact the Wake County Tax Office at 856-6600. The following tax rates were set for fiscal year July 1, 1996 - June 30, 1997:

1. County property (outside the City limits) is taxed at a rate of $.76 per $100 assessed valuation.

County Property Tax $.76

2. City property (inside the City limits) is taxed at a rate of $.54 per $100 assessed valuation.

City Property Tax $ .54

County Property Tax $ .76

TOTAL $1.3 (per $100 assessed valuation)

Research Triangle Park is a "Special Taxing District" and can never be annexed by any municipality. A tax rate of $.0225 per $100 assessed valuation is applicable only in Research Triangle Park for services provided exclusively for RTP. A county fire district property tax per $100 assessed valuation may be applicable depending on property location.

SALES AND USE TAX
The sales and use tax rate is 6% (4%, state general rate plus a 2% local assessment), with certain exceptions. It is applicable to retail sales, exchanges, rentals and fabrication directly for the consumer.

Exemptions include certain sales of manufactured products to other manufacturers and others for later resale, and sales to manufacturers that become ingredients of tangible property that is later manufactured and sold as a finished good. Additionally, the tax does not apply to prescription medications, insulin, false teeth, eyeglasses, gasoline, coin operated laundries, or motor vehicles.

A 2% tax rate is applied to the sale of manufactured (mobile) homes with a maximum tax per section of home being $300.
A tax rate of 3% is levied on local telephone service, electricity, piped natural gas, and the sale of one aircraft, railway locomotive, railway car, or boat with the maximum tax on a sale being $1,500.
A 6.5% tax is placed upon intrastate toll calls and private telecommunication services.
State Corporate Tax
A 7.75% income tax is levied on the portion of net income allocable to the State. In determining net income North Carolina allows, in addition to operating expenses, depreciation's, etc., the following deductions are applied:

All taxes paid or accrued in the year except taxes on income; contributions not exceeding five percent (5%) of net income, income from tax exempt securities, dividends received to the extent that the corporation paying such dividends has paid income tax in the State; payments to employee pension or profit-sharing trusts, current year losses; and net economic losses (as defined in the law) of any or all of the five preceding years. In determining North Carolina net income, each corporation (consolidated returns not permitted) uses its federal taxable income as defined by the Internal Revenue Code as the beginning point and adds to or subtracts from this amount those specific enumerated items treated differently for state income tax purposes.

Article 4B dealing with estimated income tax payments by corporations requires every corporation having an estimated income tax liability of at least $500 to pay its tax in 4 equal installments in the 4th, 6th, 9th and 12th months of the corporation's taxable year.

Corporations domiciled in the State are not taxed on dividend income from a subsidiary corporation in which the parent owns more than fifty per cent of the voting stock.

FranchiseTax
All corporations doing business in this State are also subject to a franchise tax. Franchise tax and income tax are reported on the same return.
Summary
The major annual taxes levied on corporations by the State government are income tax, franchise tax, sales (or use) tax on purchases which, in the case of manufacturers, is relatively light. The only significant local tax paid by manufacturers is the levy on real and tangible personal property by counties and municipalities. A minor uniform levy on net receivables is administered by the State for local governments. The local sales tax applies to few cost items of manufacturers other than building materials and office equipment and supplies.