Motor Vehicle Lease and Subscription Tax
North Carolina imposes a motor vehicle lease and subscription tax on the privilege of using the highways of this state. The tax is due when a retailer elects not to pay the highway use tax when applying for a certificate of title for a motor vehicle purchased by the retailer for a limited possession commitment. A limited possession commitment is a short-term lease or rental, a long-term lease or rental, and a vehicle subscription.
Limited Possession Commitment Definitions:
- "Short-term lease or rental" - A lease or rental of a motor vehicle or motor vehicles, including a vehicle sharing service, that is not a long-term lease or rental or a vehicle subscription.
- "Long-term lease or rental" - A lease or rental made under a written agreement to lease or rent one or more vehicles to the same person for a period of at least 365 continuous days and that is not a vehicle subscription.
- "Vehicle subscription" - A written agreement that grants a person the right to use and exchange motor vehicles owned, directly or indirectly, by the person offering the agreement upon payment of a subscription fee, but it does not include a vehicle sharing service. The subscription fee must provide a person exclusive use of an agreed-upon number of motor vehicles at any given time during the full term of the subscription.
What Tax is Due?
The tax is due on the gross receipts of the limited possession commitment of the vehicle. The tax rate depends on the type of limited possession commitment.
| Type of Limited Possession Commitment | Tax Rate* |
|---|---|
| Short-term lease or rental | 8% |
| Long-term lease or rental | 3% |
| Vehicle subscription | 5% |
| *A maximum tax of two thousand dollars ($2,000) may apply for certain commercial motor vehicles and recreational vehicles. | |
A taxpayer must report the tax on Form E-500F, Motor Vehicle Lease and Subscription Tax Return.
How to Register?
A business that owes the motor vehicle lease and subscription tax must register using the online business registration portal. When registering, answer "Yes" to the question, "Will you provide motor vehicle leases or subscriptions?"
How Do I Find More Resources?
You may visit the following links to find more resources related to the motor vehicle lease and subscription tax.
- Alternate Highway Use Tax Bulletin
- Filing Frequency and Due Dates
- Important Notices Regarding the Motor Vehicle Lease and Subscription Tax
- How to Amend Your Return
- Form E-505 (this form includes legislative changes to the taxes administered by the Sales and Use Tax Division by year)
- Yearly Law Changes Publications
- Administrative Code
- Written Determinations
- NC General Statutes - Chapter 105, Article 5A
Forms
To ensure you are able to view and fill out forms, please save forms to your computer and use the latest version of Adobe Acrobat Reader. Frequently Asked Questions about Forms.
| Form | Description |
|---|---|
| E-500F | Motor Vehicle Lease and Subscription Tax Return - Instructions |
| E-588F | Claim for Refund Motor Vehicle Lease or Subscription Taxes - Instructions |
| NC-AC | Business Address Correction |
| NC-BN | Out-of-Business Notification |
To ensure you are able to view and fill out forms, please save forms to your computer and use the latest version of Adobe Acrobat Reader. Frequently Asked Questions about Forms.
| Form | Period | Description |
|---|---|---|
| E-500F | October 2019 - Current | Motor Vehicle Lease and Subscription Tax Return - Instructions |
| E-588F | October 2019 - Current | Claim for Refund Motor Vehicle Lease or Subscription Taxes - Instructions |