On March 31, 2020, the North Carolina Department of Revenue (NCDOR) issued a notice that greatly expanded penalty relief on taxes owed or items due as a result of the coronavirus.

Penalties will not be accessed by the DOR for failure to obtain a license, failure to file a return, or failure to pay a tax that is due on March 15, 2020 through July 15, 2020, assuming the corresponding license is obtained, return is filed, or tax is paid on or before July 15, 2020.

The penalty relief includes the following types of tax:

• Income and Franchise tax
• Withholding tax
• Sales and Use tax
• Scrap Tire Disposal Tax
• White Goods Disposal Tax
• Motor Vehicle Lease and Subscription Tax
• Solid Waste Disposal Tax
• 911 Service Charge for Prepaid Telecommunications Service
• Dry-Cleaning Solvent Tax
• Primary Forest Products Tax
• Freight Car Line Companies
• Various Taxes Administered by the Excise Tax Division

You do not need to request a penalty waiver, as relief is automatically granted. If a taxpayer is assessed a penalty for one of these taxes where relief is available until July 15, the taxpayer should contact NCDOR.

Note that some penalties associated with these taxes can be substantial. If businesses take advantage of the opportunity to postpone remittance of these obligations, it is critical that they not lose track of them and make plans to pay them by July 15, unless further relief is granted. Also, keep in mind that certain taxes such as withholding taxes and sales tax, are considered “trust funds” and should not be used by the company. By law, use of those funds can result in civil penalties and criminal liability.

As we previously reported, by law the Department is unable to waive any interest incurred on past due obligations, except in the limited case of interest on taxes imposed prior to or during bankruptcy declaration. Currently, the annual interest rate is set at 5%.