North Carolina law includes a specific motor vehicle lease and subscription tax, applicable when retailers choose not to pay the highway use tax upon titling a vehicle intended for lease or subscription services. This tax applies to the “privilege of using the highways” in North Carolina and is triggered when a vehicle is acquired for what is defined as a “limited possession commitment.” This commitment encompasses various forms of vehicle access agreements, including short-term rentals, long-term leases, and vehicle subscriptions.
To clarify the scope of this tax, North Carolina defines these “limited possession commitments” as follows:
- Short-term lease or rental: This covers typical car rentals, including vehicle sharing services, that don’t fall under long-term agreements or subscription models.
- Long-term lease or rental: This refers to leases or rentals established through written agreements for periods of 365 continuous days or more with the same person. Critically, these are distinct from vehicle subscriptions.
- Vehicle subscription: This is defined as a written agreement granting access to a fleet of vehicles owned by the subscription provider. Subscribers pay a fee for the right to use and exchange vehicles, ensuring exclusive use of a set number of vehicles at any given time throughout their subscription term. Vehicle sharing services are specifically excluded from this definition.
What Are the NC Vehicle Sales Tax Rates for Leases and Subscriptions?
The tax is calculated on the gross receipts from the limited possession commitment. The applicable tax rate varies depending on the type of agreement:
| Type of Limited Possession Commitment | Tax Rate* |
|---|---|
| Short-term lease or rental | 8% |
| Long-term lease or rental | 3% |
| Vehicle subscription | 5% |
| *For certain commercial motor vehicles and recreational vehicles, a maximum tax of $2,000 may apply. |
Businesses are required to report this tax using Form E-500F, Motor Vehicle Lease and Subscription Tax Return, available on the North Carolina Department of Revenue website.
How to Register for NC Vehicle Lease and Subscription Tax
Businesses liable for the motor vehicle lease and subscription tax must register through the North Carolina Department of Revenue’s online business registration portal. During the registration process, it is essential to answer “Yes” to the question: “Will you provide motor vehicle leases or subscriptions?” This ensures proper registration for this specific tax obligation.
Finding More Information on NC Vehicle Sales Tax for Leases
For additional details and resources regarding the motor vehicle lease and subscription tax, you can explore the following links provided by the North Carolina Department of Revenue. These resources offer comprehensive information and guidance to help businesses comply with these tax regulations.
