Instructions for Form E-554, Consumer Use Tax Return

General Information

You must pay consumer use tax if you purchased, leased, or rented taxable items inside or outside this state for storage, use, or consumption in North Carolina and did not pay the applicable sales or use tax at the time of purchase. Items subject to North Carolina use tax include tangible personal property, certain digital property, and taxable services. You must pay use tax to the Department when retailers, remote sellers, or facilitators do not collect sales or use tax on taxable transactions. 

Consumer Use Tax Forms

  • Form E-554, Consumer Use Tax Return –
    • If you do not file a North Carolina Individual Income Tax Return, you must report the use tax due on your purchases on a Consumer Use Tax Return.
    • If you owe use tax on purchases of a boat, aircraft, or food, you must report the use tax due on Form E-554, Consumer Use Tax Return.
    • You must file this form and pay the amount due by April 15th of the year following the purchase. Forms filed after the due date are subject to penalty and interest.
  • North Carolina Individual Income Tax Return – If you file a North Carolina Individual Income Tax Return, you must include the use tax due on your individual income tax return except for use tax due on a boat, aircraft, or food.

Common Examples

Taxable items on which you may owe consumer use tax include, but are not limited to:

  • Tangible personal property including:
    • Computers and other electronic equipment
    • Home furnishings
    • Clothing
    • Jewelry
    • Sporting goods
    • CDs (Compact Discs) and DVDs
    • ATVs (All Terrain Vehicles)
    • Prewritten software (including downloads)
  • Certain digital property, including the following when transferred electronically:
    • Digital music
    • Podcasts and digital readings of books
    • Digital movies, TV shows, and music videos
    • Digital books, magazines, and newspapers
    • Digital photographs and greeting cards
  • Taxable services and other items including:
    • Prepaid telephone calling cards and services
    • Certain service contracts
    • Admission to an entertainment activity in the state
    • Repair, maintenance, and installation services performed outside the state where the item is returned to the owner or the owner’s designee inside the state.

How to Prepare Return: Specific Line and Column Instructions

Important: Only use blue or black ink to complete your return.

Name, Address, Social Security Number, and Period – In the blocks provided, indicate the period covered by the return, your name, Social Security Number (SSN), address including county, telephone number, and the beginning and ending dates of the period covered by your return. Use capital letters when entering your name and address. If your return is filed for calendar year 202X, you should enter 01-01-2X for the period beginning and 12-31-2X for the period ending.

  • Line 1 - 4.75% General State Rate: In the "Purchases" column, you should enter the total amount of purchases subject to the 4.75% general state tax rate. To compute the general state tax amount, multiply the amount in the "Purchases" column due by 4.75% (0.0475). Enter the general state tax amount in the "Tax" column.
    • If Paying Use Tax on the Purchase of Aircraft: In the "Purchases" column, enter the purchase price of the aircraft, including all accessories attached to the aircraft, before trade-in allowance. Compute the tax due by multiplying the purchase amount entered by 4.75% (0.0475). Enter the general state tax amount in the "Tax" column. There is a maximum tax due of $2,500.00 per aircraft.
  • Line 2 - 3.00% State Rate: In the "Purchases" column, you should enter the purchase price of the boat, including all accessories attached to the boat, before trade-in allowance. Do not include the cost of the trailer. Compute the tax due by multiplying the purchase amount entered by 0.03 and enter in the "Tax" column. There is a maximum tax due of $1,500.00 per boat.
  • Line 3 - 2% Food Rate: In the "Purchases column", you should enter the total amount of purchases subject to the 2% food tax rate. To compute the food tax amount, multiply the amount in the "Purchases" column by 2% (0.02). Enter the food tax amount in the "Tax" column.
  • Line 4 - 2.00% County Rate: In the "Purchases" column, you should enter the total amount of purchases subject to the 2% local rate of tax. To compute the 2% local rate tax amount, multiply the amount in the "Purchases" column by 2% (0.02). Enter the 2% local rate tax amount in the "Tax" column.
  • Line 5 - 2.25% County Rate: In the "Purchases" column, you should enter the total amount of purchases subject to the 2.25% local rate of tax. To compute the 2.25% local rate tax amount, multiply the amount in the "Purchases" column by 2.25% (0.0225). Enter the 2.25% local rate tax amount in the "Tax" column.
  • Line 6 - 0.5% Transit Rate: In the "Purchases" column, you should enter the total amount of purchases subject to the 0.50% local rate of tax. To compute the 0.50% local rate tax amount, multiply the amount in the "Purchases" column by 0.50% (0.005). Enter the 0.50% local rate tax amount in the "Tax" column.
  • Line 7 - 1.00% Additional County Rate: In the "Purchases" column, you should enter the total amount of purchases subject to the 1.00% additional county rate of tax. To compute the 1.00% additional county rate of tax amount, multiply the amount in the "Purchases" column by 1.00% (0.01). Enter the 1.00% additional county rate of tax amount in the "Tax" column.
  • Line 8 - Total Tax: Add the amounts in the "Tax" column on Lines 1, 2, 3, 4, 5, 6, and 7 and enter the sum in the "Tax" column.
  • Line 9 - Credit for Sales and Use Tax Paid to Another State: Calculate the amount of sales or use tax legally due and properly paid to another state on the purchase amounts reflected on Lines 1 through 7 and enter the sum in the "Tax" column. If you paid a sales tax on products in the other state, you are entitled to a tax credit for the state tax legally due and properly paid against your state use tax liability in North Carolina and any local tax legally due and properly paid against your local use tax liability in North Carolina.
  • Line 10 - Tax Due: Subtract Line 9 from Line 8 and enter the result in the "Tax" column.
  • Line 11 - Penalty: Enter the sum of the penalties that apply to you in the "Tax" column.
    • If you file a return after the due date, multiply the amount shown on Line 10 by 5% (0.05) for each month, or part of a month, that the return is filed late. The maximum failure to file return penalty is 25% of the total tax.
    • If you do not pay the tax when due, multiply the tax amount shown on Line 10 by 5% (0.05). The failure to pay tax when due penalty is 5% of the total tax.
  • Line 12 - Interest: If you do not pay the tax when due, compute interest on the tax amount shown on Line 10.
  • Line 13 -Total Due: Enter the total amount due by adding Lines 10, 11, and 12 in the "Tax" column.

If Reporting the Purchase of an Aircraft or Boat: As applicable, enter the aircraft serial number or the boat registration or documentation number in the space provided. 

Signature and Verification: You must sign and date your return. You should also include your title and phone number in the spaces provided.

Payment: Payment must be made in U.S. dollars by check or money order drawn on a U.S. (domestic) bank payable to N.C. Department of Revenue. Do not staple, tape, or paper clip your payment to the return. Do not fold your payment.

Mailing: Mail this return with your payment to the address on the return.

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