Disbursement Services Section (APY)
POLICY 8
Effective Date: 06/01/1999
Last Modified Date: 02/11/2004
General
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 N.C. 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% of amounts paid for personal services performed in NC by a nonresident (i.e. out-of-state) 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 new tax withholding requirement does not affect the payments of salaries and wages made to University faculty, staff, student, and temporary employees. The new requirement does affect payments made to independent contractors including individuals, partnerships, corporations, and other businesses.
Payments for Personal Services
Payments for personal services are currently processed several ways. The Request for Payment of Independent Contractor, the Check Request, and the Purchase Requisition can all be used to pay for some form of personal services. The Disbursement Services department reviews the disbursements made using these various methods and applies the new tax withholding and reporting requirements for University funds.
Additional Information
See also Appendix 6 for detailed information regarding the N.C. income tax withholding requirement for non-wage compensation paid to nonresidents.
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