The services that citizens depend on from government -- streets, water, sewer and emergency services -- all cost money -- money that comes from taxes. Sales taxes, such as the tax added to restaurant meals, raise funds from not only from residents, but from all who use local services -- including tourists and people just passing through. In North Carolina, as in other states, diners face a patchwork of sales taxes.
State Sales Tax
The North Carolina state legislature levies a 4.75 percent general sales tax on most retail sales within the state, including prepared foods and beverages in restaurants. This general rate applies to food prepared and consumed on the premises of full service restaurants and other retail establishments such as taverns and fast food shops that serve food. Gratuities, complimentary meals or hors d'oeuvres furnished without charge to patrons, and free meals for restaurant employees are not taxed.
County Sales Taxes
As of 2014, there were 1012 taxing districts in North Carolina, including counties, cities and limited meal tax levies. Each of these districts adds its levy to the general sales tax. North Carolina counties may add a sales tax of up to 2.75 percent tax. Typical county total taxes are 6.75 to 7 percent. The counties with the highest combined rates are Mecklenburg, Durham and Orange counties at 7.5 percent – all add .5 percent special taxes earmarked for such purposes as tourism or transportation.
Local Option Taxes
Local governments may also add to their sales tax on prepared meals with a special act on the part of the Legislature. Brevard, which supports a large music center, was granted an elevated rate by the Legislature of 1.5 percent in 2014, subject to the same limitations and exceptions as other meal levies. Charlotte, in Mecklenburg County, adds the standard 1 percent meal tax, making dinner in Charlotte taxable at 9 percent. Dinner in Raleigh, however, is taxed at 7.75 total percent in the part of the city that lies in Wake county and 8.75 percent in the slip of the city in Durham County, due to county rate differences.
Exemptions, Holidays and Amendments
Several long-standing exemptions were repealed by the legislature, effective July 1, 2014 or January 1, 2014. The tax holidays passed in 2001 also expired. As of July 1, 2014, any prepared restaurant food, including items such as canned sodas, are taxed with combined state, county and applicable local levies. Exemptions surviving the 2014 repeals included meals furnished by hotels, motels, boardinghouses, camps and others when meals are included in a daily or weekly occupancy rate. Exemptions also apply to tips given directly to servers, meals provided by non-profit organizations to elderly or disadvantaged persons and food provided by religious organizations where proceeds benefit only the providing organization.
- Tax Foundation: Meals Taxes in Major U.S. Cities
- Tax-Rates.org: The 2012-2014 North Carolina State Sales Tax by County
- North Carolina Department of Revenue: Sales and Use Tax
- North Carolina Department of Revenue: Section 19 -- Food and Food Products
- North Carolina Department of Revenue: Tax Law Update (see page 23)
- North Carolina Department of Revenue: Sales and Use Tax Frequently Asked Questions
- Wake County Revenue Department: Prepared Food and Beverage Tax
- Wake County Revenue Department: Wake County 7.75 Percent Combined State and Local Sales/Use Tax Prepared Food and Beverage Tax Chart
- North Carolina Legislature: Senate Bill 876