NC Water Ports’ Purchases May Be Allowed Retroactive Sales Tax Exemption

The North Carolina governor approved an amendment to N.C. Gen. Stat § 105-187.51B(a)(5) on July 14, 2016, that applies a privilege tax for specific purchases made by a company residing at a North Carolina water port that purchase “specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities.” Purchases which may qualify for this privilege tax include the machinery and equipment used at the ports facility for unloading of cargo or for preparing the cargo for transport and use at a manufacturing location. It would also include parts, accessories or attachments used upon the subject machinery and equipment.

The privilege tax is at a rate of 1.00%, with a maximum collectible tax amount of $80.00 per article of machinery, equipment, part or accessory. Purchases that do not qualify for this exemption would be assessed North Carolina sales taxes (state, local and transit tax) at a maximum rate in North Carolina of 7.5%. A big advantage for this recently signed amendment is the privilege tax has been made retroactive and therefore may be applied to purchases dating back to July 1, 2013. If purchases you made may qualify for the sales tax exemption you may be entitled to a refund of sales tax paid and your future purchases would be assessed the 1% privilege tax and enjoy the sales tax exemption.

Tips for the Taxpayer

To take advantage of the sales tax exemption, you as the purchaser will need to provide a completed, signed and dated sales tax exemption certificate to the seller. As the purchaser/taxpayer you must register for machinery and equipment tax and will remit the 1% privilege tax to the state of NC using Form E-500J, Machinery and Equipment Tax Return. If instead you are offering the sales tax exemption to a purchaser ensure you employ good recordkeeping processes as during an audit missing or incomplete sales tax exemption certificates will lay the tax responsibility on the seller. 

For More Information

If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.

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Allyn Contributor: Jodi Tessier