Direct Pay Permit for Sales and Use Taxes on Tangible Personal Property, Digital Property, and Services
General Information
A direct pay permit for sales and use taxes on tangible personal property, digital property, and services allows its holder to purchase tangible personal property, digital property, and services without paying sales and use tax to a vendor and authorizes the vendor not to collect any tax on a sale to a permit holder.
A direct pay permit for sales and use taxes on tangible personal property, digital property, and services can be issued for the following reasons:
- The place of business where the item will be stored, used, or consumed in the State is not known at the time of the purchase and a different tax consequence applies depending on where the item is used in the State.
- The manner in which the property will be stored, used, or consumed in the State is not known at the time of purchase and one or more of the potential uses is taxable but others are not taxable in the State.
The holder of a direct pay permit for sales and use taxes on tangible personal property, digital property, and services must file applicable tax returns, remit the tax due, and maintain records that clearly reflect the tax liability. The tax is payable when the property is placed in use or the service is received.
Prohibited Uses
A direct pay permit for sales and use taxes on tangible personal property, digital property, and services may not be used for purposes identified for other direct pay permits such as direct mail, a qualified jet engine, certain boat, aircraft, or qualified jet engine charges and services, qualifying spiritous liquor, and telecommunications services or ancillary services.
A direct pay permit for sales and use taxes on tangible personal property, digital property, and services does not apply to the purchase of the following items:
- Electricity.
- Piped natural gas.
- Video programming.
- Spirituous liquor.
- Rentals of accommodations.
- Prepared meals and beverages.
A direct pay permit for sales and use taxes on tangible personal property, digital property, and services does not apply to the following taxes:
- Highway use taxes or alternate highway use taxes paid on the purchase, lease, or rental of motor vehicles.
- Scrap tire disposal tax levied on new tires.
- Occupancy taxes levied and administered by local governments in the State.
- White goods disposal tax levied on new white goods.
- Dry-cleaning solvent tax levied on dry-cleaning solvent purchased by a dry-cleaning facility.
- 911 service charge for prepaid wireless telecommunications service.
- Transportation commerce tax.
Who Qualifies?
A direct pay permit can be issued to a business that purchases certain items that could be either subject to or exempt from sales and use tax. A taxpayer’s annual purchases of certain items must be at least five million dollars ($5,000,000) to qualify.
Retail and wholesale businesses with locations only in North Carolina whose exempt purchases are for resale are not eligible for a direct pay permit.
Application Process
A business may request permission from the Secretary of Revenue to discharge its sales and use tax liability directly to the Department by completing Form E-595A, Application for Direct Pay Permit, Sales and Use Taxes for Tangible Personal Property, Digital Property, and Services. This authorization by the Secretary is conditioned upon full compliance with the provisions of the Sales and Use Tax Law, timely payment of all taxes due and provided the Secretary finds that the applicant's compliance burden will be greatly reduced by use of the permit.