North Carolina tax tidbit: digital property

When 2010 rolled in, so did assessment of North Carolina's 5.75 percent state sales tax on certain digital property.

The new tax covers a wide range of digital material, whether delivered or accessed electronically by direct download or by entering a digital code. Covered items include podcasts, ring tones, movies, books, magazines, newspapers, newsletters, reports, photographs and greeting cards.

In addition, certain electronically-delivered computer software is no longer exempt from sales tax. But there is a new exemption that includes computer software or digital property that becomes a component of other computer software or digital property that is part of a service.

As with other Tar Heel State sales taxes, there's a corresponding use tax if you buy a taxable digital property but don't pay the full tax at time of purchase.

If it was a business purchase, you must register with the North Carolina Department of Revenue to report and pay the tax due by filing Form E-500, Sales and Use Tax return. If it was personal purchase, report it on line 19 of Form D-400, your state income tax return.

And if you owe the digital property use tax for a personal purchase but aren't required to file an income tax return, file Form E-554, Consumer Use Tax Return.

Tax trip around the United States: This post is part of our series highlighting tax information from the 50 U.S. states and Washington, D.C. You can read other state tax blurbs at our Complete menu of tasty state tax tidbits.

The State Tax Departments page provides links to official state and District of Columbia revenue Web sites so that you can find out more about your home's tax laws and filing requirements.

As we work through the 2010 tax season, a different state will be featured each day as noted in Don't forget your state taxes! Check back to see what tax tidbit we share about your home.

Related posts:

• State Tax Tidbits
• State Tax Departments
• Don't forget your state taxes! 
• State use taxes tend to be useless 

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