Sales And Use Tax 2026 Updates In North Carolina: What Business Owners Need To Know

The North Carolina Department of Revenue published its 2026 Sales and Use Tax Bulletins effective January 1, 2026. The bulletins include several notable updates providing new guidance on tariffs, parking fees for accommodation rentals, boat brokers, artificial turf installation and repair, transportation commerce tax, and embroidery services. Here's a summary of the updates and what they mean for retailers selling in or into North Carolina.

Tariffs

The Department added a section on tariffs providing guidance for both retailers and consumers. It states that tariffs on retailers are part of the sales price of an item subject to sales and use tax regardless of whether it is separately stated. Regarding use taxes for consumers, tariffs paid by a consumer to the customs authority when importing a product are not subject to a use tax.

What Does This Mean for Your Business?

For retailers who import goods for retail sale, this rule means that tariffs often increase not just the cost of goods, but also the amount of sales or use tax owed. That tariff is treated as part of the product's sales price, even if it is listed separately on the invoice to your retail customer. As a result, the tariff becomes part of the tax base, creating higher prices for customers. Also, if a business fails to include tariff-related charges in taxable sales, this may increase its audit risk because the business will be liable for the uncollected sales tax on that portion of the price.

By contrast, when a business imports goods for its own use and pays the tariff directly to U.S. Customs, the tariff is not subject to use tax. For large equipment or inventory purchases, this distinction can save substantial amounts of money.

For business owners, the takeaway is that the mechanism by which tariffs are paid and how goods are imported can have significant financial consequences. Retailers should review whether they are properly charging sales tax on tariff-related charges to avoid audit exposure, while importers should review whether they are overpaying use tax on imported equipment or goods.

Parking Fees for Accommodation Rentals

The Department added guidance clarifying that parking fees charged by retailers of accommodations (such as hotels and short-term rental providers) are not subject to sales and use tax if the charges are separately stated on the invoice or similar billing document.

What Does This Mean for Your Business?

Hotel operators or operators of other short-term accommodation rentals should review how parking fees are structured and invoiced. These operators should list any parking fees on a separate line of the invoice to ensure that the charge is not subject to sales and use tax. Other examples of accommodation-related charges in the bulletin not subject to sales and use tax include internet services, telephone calls, cancellation fees, and security deposits refunded to the purchaser of an accommodation rental. Be careful not to collect sales tax on these parking fees, as an overcollection of sales tax by the business could lead to a consumer action (or class action) to recover the overcharged taxes.

However, if a business overcharges and collects that overcharged tax, all such tax must be remitted to the State. The business cannot retain the overcharged portion of the tax.

Boat Brokers as Marketplace Facilitators

The Department added a new section specifically stating that boat brokers who meet the definition of "marketplace facilitators" must remit sales and use tax on any boat sales they have facilitated.

Under N.C.G.S § 105-164.3(133), a "marketplace facilitator" is a "person that directly or indirectly (1) lists or otherwise makes available for sale a marketplace seller's items through a marketplace owned or operated by the marketplace facilitator," and (2) either "collects the sales price or purchase price of a marketplace seller's items" or "makes payment processing services available to purchasers for the sale of a marketplace seller's items."

What Does This Mean for Your Business?

If boat brokers or dealers meet the definition of marketplace facilitators, they must remit sales tax on any transactions related to the boats. For instance, if a boat broker allows a seller to leave a used boat for sale on the broker's lot and then a buyer purchases the boat, the broker is responsible for collecting sales tax from the buyer and remitting to the Department the sales tax on that transaction. Boat sellers and boat brokers may consider reevaluating their contracts to ensure that the sales tax responsibilities reflect the Department's guidance.

Installation and Repair of Artificial Turf

The Department added new guidance classifying the "installation and repair of artificial turf" as a taxable Repair, Maintenance, and Installation service, rather than a capital improvement.

In North Carolina, "repair, maintenance, and installation services" (known as "RMI" services) performed on real property (such as a house or a building), tangible personal property (e.g., machinery, HVAC units), motor vehicles, or certain digital property are subject to sales and use tax when sold at retail and sourced to NC. However, if the service is part of a real property contract for a capital improvement, the service is exempt from sales tax.

What Does This Mean for Your Business?

While the Bulletin's chart classifying certain activities as RMI services or as capital improvements is not exhaustive, it can help retailers and purchasers understand the Department's interpretation and application of North Carolina sales and use tax law. Although not mentioned in previous bulletins, the installation and repair of artificial turf has now been added the chart.

For businesses and property owners trying to determine whether these kinds of services are RMI services or capital improvements, this update clarifies the "gray area": the service is likely a taxable RMI service in the view of the Department unless facts indicate otherwise. However, businesses and property owners are still encouraged to consider the facts and circumstances of their situation to determine whether the service might fall under the capital improvement exemption.

Transportation Commerce Tax

The Department added guidance stating that the transportation commerce tax is not refundable as part of sales and use tax refund claims for interstate carriers¹, nonprofit entities, hospitals, NC and federal governmental entities, and NC state agencies. Transportation commerce taxes may include taxes imposed on transportation-related commercial activity such as shipping charges, delivery charges, moving services, or any charges related to the transportation of people or goods.

What Does This Mean for Your Business?

This update makes clear that for interstate carriers, nonprofit entities, hospitals, governmental entities, and state agencies, transportation commerce tax cannot be recovered through the sales and use tax refund process. When preparing refund claims, these taxpayers should exclude transportation commerce tax amounts.

Embroidery Services

The Department added guidance classifying "embroidery services to items other than clothing" as "repair, maintenance, and installation services" (RMI services) and provided an exemption for any embroidery consisting of the alteration and repair of clothing.

As previously mentioned, in North Carolina, RMI services performed on tangible personal property are generally subject to sales and use tax when sold at retail and sourced to NC. However, there are several RMI services that are exempt from sales and use tax. A full list of exemptions is located under Section 75-3 of the Sales and Use Tax Bulletins.

What Does This Mean for Your Business?

Retailers providing embroidery services should review whether their services are related to clothing. If so, the service may be exempt from sales and use tax and, if not, the service may be taxable.

Footnote

1 Under N.C.G.S. § 105-164.14(a), an interstate carrier is "a person who is engaged in transporting persons or property in interstate commerce for compensation. An interstate carrier is allowed a quarterly refund of a portion of the North Carolina State and local sales and use taxes paid on purchases of railway cars, locomotives, fuel, lubricants, repair parts, accessories, service contracts, and repair, maintenance, and installation services for a motor vehicle, railroad car, locomotive, or airplane operated by the interstate carrier."

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