Are you a videographer, photographer, or musician in North Carolina?
If you're selling digital content, you might be surprised to learn that you may need to collect sales tax—even when no physical product changes hands. Let's break down what this means for your creative business.
The Digital Tax Landscape: What Changed?
The digital marketplace has transformed how creative professionals deliver their work. North Carolina's tax laws have evolved to keep pace, and in 2019, a significant change occurred that affects your business.
Due to a 2019 amendment to North Carolina sales tax laws, North Carolina requires sales tax collection on "certain digital property," including:
- Digital audio works (such as music tracks, albums, audiobooks and other sound recordings);
- Digital audiovisual works (such as movies and videos, including music videos);
- Digital books; and
- Electronically transmitted magazines, newspapers, newsletters, reports, and other publications, photographs, and greeting cards.
What This Means for Your Business
As a creative professional in North Carolina, you may need to collect sales tax on sales of your digital products, even if you never create or transmit a physical version. This applies whether you're:
- A wedding photographer selling digital photos;
- A videographer selling downloadable video files;
- A musician selling tracks online; or
- A content creator selling access to digital publications
Note: If you are selling through an online marketplace (known as a "marketplace facilitator"), the marketplace facilitator may be considered the retailer and have the obligation to collect sales tax on such sales. If so, the marketplace facilitator is required to provide or make available to you monthly reports showing the gross sales and number of transactions sourced to North Carolina and made on your behalf.
Key Points About Collection and Rates
Here's what you need to know about collecting sales tax:
- If you have a sales tax collection obligation, you need to register with the North Carolina Department of Revenue as a retailer for sales tax purposes.
- The total sales tax rate typically ranges from 6.75% to 7.5% depending on the county and municipality.
- You must collect sales tax on your taxable sales that are sourced to North Carolina.
- The sales tax must be clearly stated on your invoices or included in your stated price.
- All sales tax you collect must be remitted to the North Carolina Department of Revenue.
For example, if you're a photographer charging $10,000 for sales of digital photographs to a North Carolina customer, you may need to charge, collect, and remit an additional $700 in sales tax (assuming a 7% rate). That's not pocket change—and failing to collect it properly could lead to significant issues down the road.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
