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What is included in state taxes and what is excluded?

Ken Little
StarNews

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“There really is not a simple answer to this question as a result of various items being subject to tax at various rates,” said Thomas Beam, a spokesman for the N.C. Department of Revenue.

That said, state statutes list numerous items that are exempt from the retail sales and use tax.

For instance, the “Agricultural Group” includes “any of the following items sold to a farmer for use in the planting, cultivating, harvesting or curing of farm crops or in the production of dairy products, eggs, or animals.”

A farmer, for purposes of definition in the statute, includes “a dairy operator, a poultry farmer, an egg producer, a livestock farmer, a farmer of crops, and a farmer of aquatic species.”

Products exempted from tax include seeds, commercial fertilizer, lime, land plaster, plastic mulch, plant bed covers, potting soil and bailer twine.

Also exempted are farm machinery, attachment and repair parts for farm machinery, lubricants applied to farm machinery, a horse or mule, and fuel.

Other exemptions include “electricity sold to a farmer to be used for any farming purpose other than preparing food, heating dwellings, and other household purpose.”

Additional exemptions apply to other aspects of farming, including “products of forests and mines in their original or unmanufactured state when such sales are made by the producer in the capacity of producer,” cotton, tobacco, peanuts or other farm products “sold to manufacturers for further manufacturing or processing,” baby chicks and poults “sold for commercial poultry or egg production,” along with “products of a farm sold in their original state by the producer of the products if the producer is not primarily a retail merchant and ice used to preserve agriculture, aquaculture and commercial fishery products until the products are sold at retail.”

That’s just several examples.

Other sales tax-exempt items in the “Industrial,” “Medical” and other categories include certain wood chippers, “sales of products of waters in their original or manufactured state when such sales are made by the producer in the capacity of producer,” “prosthetic devices for human use,” insulin, public school books on the state’s adopted list, and “interior design services provided in conjunction with the sale or personal property.”

Also exempt from state sales tax is food sold “by a church or religious organization not operated for profit when the proceeds of the sales are actually used for religious activities.”

“Items subject to the general state sales and use tax rate of 4.75 percent are also subject to the applicable local rates of taxes based on where a sale is sourced,” Beam said.

To view the state tax imposition statute, go to:

http://www.ncga.state.nc.us/gascripts/statutes/statutelookup.pl?statute=105-164.6

Beam said there “are numerous exemptions from sales and use taxes” and the majority of those can be found at the following link:

http://www.ncga.state.nc.us/gascripts/statutes/statutelookup.pl?statute=105-164.13

RELATED LINKS:

StarNews: General Assembly considering taxing some services

What percentage of city and county taxes come from homeowners and from business?

Why is North Carolina’s gasoline tax so much higher than surrounding states?

 

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