§ 105-163.3. (Effective for taxable years beginning before January 1, 2010) Certain payers must withhold taxes. - North Carolina Statutes

§105‑163.3.  (Effective for taxable years beginning before January 1,2010) Certain payers must withhold taxes.

(a)        Requirement. –Every payer who pays a contractor more than one thousand five hundred dollars($1,500) during a calendar year shall deduct and withhold from compensationpaid to the contractor the State income taxes payable by the contractor on thecompensation as provided in this section. The amount of taxes to be withheld isfour percent (4%) of the compensation paid to the contractor. The taxes a payerwithholds are held in trust for the Secretary.

(b)        Exemptions. – Thewithholding requirement does not apply to the following:

(1)        Compensation that issubject to the withholding requirement of G.S. 105‑163.2.

(2)        Compensation paid toan ordained or licensed member of the clergy.

(3)        Compensation paid toan entity exempt from tax under G.S. 105‑130.11.

(c)        Returns; Due Date.– A payer shall file a return with the Secretary on a form prepared by theSecretary and shall provide any information required by the Secretary. Thereturn is due and the withheld taxes are payable by the last day of the firstmonth after the end of each calendar quarter during which the payer payscompensation to a contractor. The Secretary may extend the time for filing thereturn or paying the tax as provided in G.S. 105‑263.

(d)        Annual Statement;Report to Secretary. – A payer required to deduct and withhold from acontractor's compensation under this section shall furnish to the contractorduplicate copies of a written statement showing the following:

(1)        The payer's name,address, and taxpayer identification number.

(2)        The contractor'sname, address, and taxpayer identification number.

(3)        The total amount ofcompensation paid during the calendar year.

(4)        The total amountdeducted and withheld under this section during the calendar year.

This statement is due by January31 following the calendar year. If the personal services for which the payer ispaying are completed before the end of the calendar year and the contractorrequests the statement, the statement is due within 45 days after the payer'slast payment of compensation to the contractor. The Secretary may require thepayer to include additional information on the statement.

Each payer shall file with theSecretary an annual report that compiles the information contained in each ofthe payer's statements to contractors and any other information required by theSecretary. This report is due on the date prescribed by the Secretary and is inlieu of the information report required by G.S. 105‑154.

(e)        Records. – If apayer does not withhold from payments to a nonresident entity because theentity is exempt from tax under G.S. 105‑130.11, the payer shall obtainfrom the entity documentation proving its exemption from tax. If a payer doesnot withhold from payments to a nonresident corporation or a nonresidentlimited liability company because the entity has obtained a certificate ofauthority from the Secretary of State, the payer shall obtain from the entityits corporate identification number issued by the Secretary of State. If apayer does not withhold from payments to an individual because the individualis a resident, the payer shall obtain the individual's address and socialsecurity number. If a payer does not withhold from a partnership because thepartnership has a permanent place of business in this State, the payer shallobtain the partnership's address and taxpayer identification number. The payershall retain this information with its records.

(f)         Payer May RepayAmounts Withheld Improperly. – A payer may refund to a person any amount thepayer withheld improperly from the person under this section, if the refund ismade before the end of the calendar year and before the payer furnishes theperson the annual statement required by subsection (d) of this section. Anamount is withheld improperly if it is withheld from a payment to a person whois not a contractor, if it is withheld from a payment that is not compensation,or if it is in excess of the amount required to be withheld under this section.A payer who makes a refund under this section must:

(1)        Not report theamount refunded on the annual statement required by subsection (d); and

(2)        Either not pay tothe Secretary the amount refunded or, if the amount refunded has already beenpaid to the Secretary, reduce by the amount refunded the next payments to theSecretary of taxes withheld from the person. (1959, c. 1259, s. 1; 1973,c. 476, s. 193; 1989, c. 728, s. 1.42; 1989 (Reg. Sess., 1990), c. 945, s. 8; 1997‑109,s. 2; 1998‑98, ss. 11‑13; 1998‑162, s. 3.)

§ 105‑163.3. (Effective for taxable years beginning on or after January 1, 2010) Certainpayers must withhold taxes.

(a)        Requirement. – Everypayer who pays more than one thousand five hundred dollars ($1,500) during acalendar year to either a nonresident contractor or an ITIN contractor mustdeduct and withhold from compensation paid to the contractor the State incometaxes payable by the contractor on the compensation as provided in thissection. The amount of taxes to be withheld is four percent (4%) of thecompensation paid to the contractor. The taxes a payer withholds are held intrust for the Secretary.

(b)        Exemptions. – Thewithholding requirement does not apply to the following:

(1)        Compensation that issubject to the withholding requirement of G.S. 105‑163.2.

(2)        Compensation paid toan ordained or licensed member of the clergy.

(3)        Compensation paid toan entity exempt from tax under G.S. 105‑130.11.

(c)        Returns. – A payermust file a return with the Secretary and pay the withheld taxes to theSecretary in accordance with the requirements in G.S. 105‑163.6.

(d)        Annual Statementand Report. – A payer required to deduct and withhold from a contractor'scompensation under this section must give the contractor a written statementthat sets out the following information and any other information required bythe Secretary:

(1)        The payer's name,address, and taxpayer identification number.

(2)        The contractor'sname, address, and taxpayer identification number.

(3)        The total amount ofcompensation paid during the calendar year.

(4)        The total amountdeducted and withheld under this section during the calendar year.

This statement is due by January31 following the end of the calendar year, unless the personal services forwhich the payer is paying are completed before the end of the calendar year andthe contractor requests the statement when the services are completed. In thiscircumstance, the statement is due within 45 days after the payer's last paymentof compensation to the contractor.

Each payer must file with theSecretary an annual report that compiles the information contained in each ofthe payer's statements to contractors and any other information required by theSecretary. This report is due on the date prescribed by the Secretary and is inlieu of the information report required by G.S. 105‑154.

(e)        Records. – Thissubsection applies to a payer who pays compensation for personal servicesperformed in connection with a performance, an entertainment, an athleticevent, a speech, or the creation of a film, radio, or television program. If apayer does not withhold from payments to a nonresident entity because theentity is exempt from tax under G.S. 105‑130.11, the payer must obtainfrom the entity documentation proving its exemption from tax. If a payer doesnot withhold from payments to a nonresident corporation or a nonresidentlimited liability company because the entity has obtained a certificate ofauthority from the Secretary of State, the payer must obtain from the entityits corporate identification number issued by the Secretary of State. If apayer does not withhold from payments to an individual because the individualis a resident, the payer must obtain the individual's address and socialsecurity number. If a payer does not withhold from a partnership because thepartnership has a permanent place of business in this State, the payer mustobtain the partnership's address and taxpayer identification number. The payermust retain this information with its records.

(f)         Payer May RepayAmounts Withheld Improperly. – A payer may refund to a person any amount thepayer withheld improperly from the person under this section, if the refund ismade before the end of the calendar year and before the payer furnishes theperson the annual statement required by subsection (d) of this section. Anamount is withheld improperly if it is withheld from a payment to a person whois not a nonresident contractor or an ITIN contractor, if it is withheld from apayment that is not compensation, or if it is in excess of the amount requiredto be withheld under this section. A payer who makes a refund under thissection must take the following actions:

(1)        Not report theamount refunded on the annual statement required by subsection (d) of thissection.

(2)        Either not pay tothe Secretary the amount refunded or, if the amount refunded has already beenpaid to the Secretary, reduce by the amount refunded the next payments to theSecretary of taxes withheld from the person.  (1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1989, c.728, s. 1.42; 1989 (Reg. Sess., 1990), c. 945, s. 8; 1997‑109, s. 2; 1998‑98,ss. 11‑13; 1998‑162, s. 3; 2009‑476, s. 2.)