Accounts Payable

Effective Date: 09/21/06

Policy Statement 7: Tax Withholdings

Non-Residents of North Carolina

NC Income Tax - Nonresident Personal Services
The 1997 session of the General Assembly enacted legislation which requires withholding of NC income tax at the rate of 4% on non-wage compensation paid to nonresident individuals and businesses for personal services rendered within NC. The withholding tax applies to a nonresident individual or business in connection with a performance, an entertainment, an athletic event, a speech (workshop), or the creation of a film, radio, or television program.

Withholding is only required if the contractor is paid more than $1500 during the calendar year. No tax is required to be withheld if payments, or payments in total, are less that $1500 – with one exception: If you expect to pay a contractor more than $1500 during a year, you must withhold 4% from all payments.

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 NC
• Any entity that is exempt from NC corporate income tax
• An individual who is an ordained or licensed member of the clergy
• Resident of North Carolina

A certificate of authority does not apply to individuals or partnerships. A limited liability company or foreign corporation may obtain an application for a certificate of authority by writing to the Secretary of State, Corporations Division, PO Box 29622, Raleigh, NC 27626 or

Non-Residents of the United States

Federal Income Tax - Nonresident Personal Services
Prior to a unit hiring nonresident aliens, the Office of International Affairs must be contacted first. This office is responsible for providing guidance, information and other materials on immigration and visa issues for INS. Foreign individuals invited to ECU must enter the country with the appropriate visa to ensure that ECU can make all payments for contracted services, lectures and honorarium payments, legally and in a timely fashion.

The payee must include a (photo) copy of his/her visa to expedite matters.
The Payroll Office will review all payment requests to foreign nationals to monitor compliance with tax regulations, to ensure proper tax withholding, and to provide appropriate tax reporting. Paperwork and supporting documentation will be forwarded to Accounts Payable for payment.