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Lease or Rental of Tangible Personal Property

The gross receipts or gross proceeds derived from or the total amount agreed to be paid for the lease or rental, within North Carolina, of all kinds and types of tangible personal property not specifically exempt by statute are subject to sales and use tax at the same rate and maximum tax that is applicable to the retail sale of such property. For information on the applicable rate of tax, refer to sales and use tax rates web page. The tax is due and payable at the time the lessor bills the lessee for rent whether such billing is for the lump sum rental or on a monthly or other periodic basis. A person who leases or rents tangible personal property shall also collect tax on the separate retail sale of the property. Gross receipts derived from the lease or rental of tangible personal property and the sales and use tax thereon are generally reported to the Department on Form E-500, Sales and Use Tax Return, or through the Department’s online filing and payment system.

The certain machinery and equipment privilege tax applies to the lease or rental of tangible personal property that, if purchased, would be subject to the one percent (1%) privilege tax, with a maximum tax of eighty dollars ($80.00) per article. The privilege tax on the lease or rental of certain machinery and equipment is reported to the Department on Form E-500J, Machinery and Equipment Tax Return.

A motor vehicle lease and rental tax (alternate highway use tax) applies to the gross receipts derived from a lease or rental of a motor vehicle. The tax rate on a short-term lease or rental of a motor vehicle is eight percent (8%) and the tax rate on a long-term lease or rental of a motor vehicle is three percent (3%). The maximum tax set in N.C. Gen. Stat. § 105-187.3 applies to a continuous lease or rental of certain motor vehicles to the same person. The motor vehicle lease and rental tax is reported to the Department on Form E-500F, Motor Vehicle Lease and Rental Tax Return.

Additional Information for the Lease or Rental of Tangible Personal Property