4% NC withholding on nonresident personal services
North Carolina GS 105‐163.1 and GS 105‐163.3 requires income tax to be withheld at the rate of 4% from payments of more than $1,500.00 paid during a calendar year to nonresident individuals or nonresident entities for personal services performed in North Carolina in connection with a performance, an entertainment or athletic event, a speech, or the creation of a film, radio, or television program. Additionally, NC requires income tax to be withheld at the rate of 4% from payments of more than $1,500.00 paid during a calendar year to ITIN contractors for services provided within the State. See NC-30 for additonal information.
Examples of Services Subject to 4% withholding:
- Athletic Event
- Speeches ‐ (includes any speech that amuses, entertains, or informs is subject to the withholding requirement. This includes instructors at seminars that are open to the public for an admission fee or are for continuing education. (See FAQ link regarding withholding on nonresident payments).
- Creation of a film, radio or TV program
- All services performed by an ITIN holder/contractor
Who is subject to the NC 4% withholding:
- Nonresident Contractors
- Nonresident Entities
- ITIN Holders
Contractors Exempt from 4% withholding:
- Corporations or Limited Liability Companies that have obtained a certificate of authority from the Secretary of State.
- A partnership that has a permanent place of business in North Carolina
- Any entity that is exempt from North Carolina corporate income tax under G.S. 105‐130.11. The entity must provide verification of this tax exemption to the payer, such as a copy of the organization's federal determination letter of tax exemption or a copy of a letter of tax exemption from the Department of Revenue.
- An individual who is an ordained or licensed member of the clergy
- Resident of North Carolina
Nonresident individuals/entities: Withholding is only required if the nonresident individual or nonresident entity is paid more than $1500.00 during the calendar year. The tax must be withheld from any nonresident individual or nonresident entity (C or S corporation, partnership, or limited liability company) receiving personal services compensation in connection with a performance, entertainment, athletic event, a speech or the creation of a film, radio, or television program.
ITIN Contractors: Withholding is only required if the ITIN contractor is paid compensation of more than $1500.00 during the calendar year.
If, at the time payments are made, the payer doesn't believe the payments will exceed the $1500.00 level, then no withholding is required. However, if payments made later in the year cause the total of payments received to date to exceed $1500.00 then the payer is required to withhold the 4% from the payment that caused the total to exceed the $1500.00, as well as any subsequent payments. The payer is not required to withhold tax from the additional compensation to make up for the tax that was not withheld on earlier payments. If the payer expects to pay a contractor more than $1500.00 during a year, the payer then must withhold 4% from all payments issued even if the first payment does not exceed the $1500.00.