C. Telephone Companies (G.S. 105-120)
Note: This section addresses franchise tax due
on receipts generated on or before December 31, 2001. The franchise
tax on telephone companies was repealed effective January 1, 2002,
and replaced with G.S. 105-164.4C that consolidates all taxes
on telecommunications services into a single State sales tax.
As a result, telephone companies that are corporations will be
subject to the general business franchise tax effective January
- Basis for Taxation
Every person, firm, or corporation, foreign or domestic, owning
and/or operating a business entity for the provision of Local
Telecommunication Service in this State, is subject to an annual
franchise or privilege tax at the rate of 3.22% on gross receipts
derived from services that are obligated to be furnished by such
telephone company. Companies subject to the franchise tax levied
under this section are also required to collect and remit to the
State a sales tax at the rate of 3% of total billings.
Gross receipts derived from telecommunications service or private
telecommunications service as defined under G.S. 105-120 are subject
to a six and one-half percent (6½%) sales tax rather than the combined
3.22% franchise tax and three percent (3%) sales tax.
- Due Date of the Return and Tax
Returns are due quarterly and should contain, in addition to the
other information, the total gross receipts from such business
in North Carolina for the preceding calendar quarter. Payments
by EFT are required if the average amount of tax is at least $20,000
a month. Payments are due monthly or quarterly depending on the
company's monthly franchise tax liability as shown below:
- Monthly franchise tax average of less than $3000
Companies pay tax quarterly when filing the quarterly
reports which are due the last day of the month that follows
the quarter covered by the report.
- Monthly franchise tax average of $3000 or more
Companies pay tax monthly and are required to remit at
least ninety-five percent (95%) of the tax due in each of
the first two months of a calendar quarter with any underpayment
includable in the quarterly report. Monthly payments are due
by the last day of the month that follows the month the tax
accrues, except the payment for tax that accrues in May is
due by June 25.
- Forms to be Used for Filing
Form CD-311 is to be used for filing the reports.
- Special Exemption
Amounts derived from interstate commerce, advertising receipts,
carrier access or billing fees and pole rental receipts are not
included in the franchise tax base. The receipts received from
sales for resale are considered charges between telephone companies
not subject to the tax.
Mutual or cooperative telephone associations or companies and
municipal corporations are not required to file Form CD-311.
- Distribution to Municipalities
An amount equal to 3.09% of the gross receipts generated from
local business conducted within a municipality subject to the
franchise tax is returned to the respective municipality. To be
eligible for a distribution, a municipality must first be legally
incorporated and have either elected officials or interim officials
appointed by the Legislature.