707 - Policy on NC Income Tax Withholding Requirement for Non-Wage Compensation Paid to Nonresidents

Title

The University of North Carolina at Chapel Hill Finance Policy 707 - Policy on NC Income Tax Withholding Requirement for Non-Wage Compensation Paid to Nonresidents

Introduction

Purpose

The University is required by North Carolina law to withhold state income tax at the rate of 4 percent on non-wage compensation paid to nonresident individuals and businesses for personal services rendered within North Carolina (NC) unless certain criteria are met.

Policy

Policy Statement

The 1997 session of the General Assembly enacted legislation which requires withholding of NC income tax at the rate of 4 percent on non-wage compensation paid to nonresident individuals and businesses for personal services rendered within NC unless certain criteria are met. The withholding tax does not apply to businesses providing repairs. The withholding tax applies to individuals who provide only certain categories of services.

Withholding Requirements

The University is required to withhold 4 percent of amounts paid for personal services performed in NC by a nonresident (does not maintain a residence in North Carolina) individual or business in connection with a performance, an entertainment, an athletic event, a speech, or the creation of a film, radio, or television program.

The tax withholding requirement applies to payments for services made on or after January 1, 1998. The tax withholding requirement does not apply to purchases of goods. Also, the tax withholding requirement does not affect the payments of salaries and wages made to University faculty, staff, students, and temporary employees. The requirement does affect payments made to independent contractors including individuals, partnerships, corporations, and other businesses.

Frequently Asked Questions

Q: How do I get a refund of tax withheld from my Independent Contractor payment?
A: You will have to file a North Carolina State Tax Form D400.

Q: Do I receive a W-2 showing how much tax was withheld from my payment for services?
A: No, you will receive federal form 1099-MISC, 1099-NEC, or 1042-S, which will show any North Carolina tax withheld. Form 1099-MISC or 1099-NEC will be mailed to you no later than January 31 of the following year. Form 1042-S will be mailed no later than February 28.   

Q: I operate a speaker's bureau that frequently provides guest speakers to universities across the country. My company is a limited liability company based in Texas. My most recent payment from the University for providing a speaker had 4 percent deducted from the invoiced amount. I have never done business with a North Carolina entity before now. I personally did not perform the service so why am I being taxed?
A: To avoid this tax your company must have a certificate of authority from the NC Secretary of State.

Exceptions

Tax is not withheld from:

  • a limited liability company that has obtained a certificate of authority from the NC Secretary of State;
  • a foreign limited partnership that has a permanent place of business in NC; or
  • a foreign corporation that has obtained a certificate of authority from the NC Secretary of State.

Related Requirements

External Regulations and Consequences

University Policies, Standards, and Procedures

Contact Information

Policy Contact
Subject Contact Telephone Fax E-Mail
Non-resident withholding Accounts Payable and Vendor Services 919-843-5098 919-962-2356 accountspayable@unc.edu

Details

Article ID: 131539
Created
Thu 4/8/21 9:11 PM
Modified
Mon 1/24/22 1:14 PM
Effective Date
If the date on which this document became/becomes enforceable differs from the Origination or Last Revision, this attribute reflects the date on which it is/was enforcable.
09/17/2021 12:00 AM
Issuing Officer
Name of the document Issuing Officer. This is the individual whose organizational authority covers the policy scope and who is primarily responsible for the policy.
Issuing Officer Title
Title of the person who is primarily responsible for issuing this policy.
Director, Accounts Payable and Vendor Services
Last Review
Date on which the most recent document review was completed.
09/17/2021 12:00 AM
Last Revised
Date on which the most recent changes to this document were approved.
09/17/2021 12:00 AM
Next Review
Date on which the next document review is due.
09/15/2023 12:00 AM
Origination
Date on which the original version of this document was first made official.
06/01/1999 12:00 AM
Responsible Unit
School, Department, or other organizational unit issuing this document.
Finance and Budget