Frequently Asked Questions - Nonprofit and Governmental Entity Sales and Use Tax Refunds

It depends.  

Tax Paid in One County - If your organization only paid county sales and use tax to one county, select that county.  
Tax Paid in Multiple Counties - If your organization made purchases and paid county sales and use tax in more than one county, do not select a county and leave line 1 blank. You must complete Form E-536R, Schedule of County Sales and Use Taxes for Claims for Refund, to identify the counties in which the organization paid county tax.
 

The sourcing principles in G.S.§ 105-164.4B apply in determining where to source the sale of an item. Review the sourcing sales and use tax webpage for general sourcing information. 

Generally, you pay tax to the county where you receive the item or where you can potentially first make use of the service.

Example 1: You purchase a shirt at a store and receive the item at the store. You pay tax to the county where the store is located.

Example 2: You purchase a shirt on a website and the seller ships the items to your headquarters. You pay tax to the county where your headquarters is located.

On a claim for refund, county tax can be allocated to multiple counties from the same retailer if there are multiple transactions with the same retailer where items are being purchased at the retailer's location and other items are being delivered into a county or counties that is different from the retailer's location. This would also apply to contractors. Do not file a refund claim using the retailer address unless the transaction is sourced to the retailer's location (i.e. Items purchased and picked up in person at the retailer's location). If items are shipped/delivered to a different county than where the retailer is located, the county where the delivery occurred is the taxing county. 

Example: If you:

• receive delivered concrete supplies from Retailer XYZ at your headquarters in County A,
• receive delivered concrete supplies at a job site in County B,
• pick up items from the same retailer at the retailer's location in County C, 

you need to allocate tax to County A, B, and C for each of the transactions on Form E-536R, Schedule of County Sales and Use Taxes for Claims for Refund.

If refund claimants have any questions about which county to show when submitting their refund claim, you may email ncdor_distributionunit@ncdor.gov to reach the Financial Services Division - Distribution Unit.

Enter your organizations total purchase price of qualifying tangible personal property, services, and digital property on which state sales or use tax was paid directly to retailers.

Note: The purchase price of a modular home, manufactured home, boat, or aircraft is included in the State column only.

Enter your organization's total purchase price of qualifying tangible personal property, services, and digital property on which food, county, or transit sales or use tax was paid directly to retailers.

Note: Do not include the purchase price of a modular home, manufactured home, boat, aircraft, or other items on which your organization did not pay food, county, or transit sales or use tax.

Do not include any purchase on which your organization did not pay sales or use tax. In addition, do not include purchases of items not subject to refund. These items include: electricity, piped natural gas, telecommunications and ancillary services, video programming, prepaid meal plans; motor vehicles; scrap tire disposal or white goods disposal taxes; reimbursements for travel expenses; and alcoholic beverages.

It depends.

• If your organization only paid the 2% rate of tax on the food, only include the purchase on the Food, County & Transit column.  
• If your organization paid the general 4.75% state and applicable local and transit rates of sales or use tax, include the purchases in both the “State” and “Food, County & Transit” columns. Retailers should have charged your organization this rate on purchases of prepared food, soft drinks, dietary supplements, and candy.

Note: Reimbursement for travel expenses do not qualify for refund.

In the State column, enter the total state sales and use tax paid directly to retailers on qualifying purchases for use.

In the Food, County & Transit Column, enter the total food, county and transit sales and use tax paid directly to retailers on qualifying purchases for use.

It depends.

• If your organization only paid the 2% rate of tax on the food, only include the tax in the Food, County & Transit column.
• If your organization paid the general 4.75% state and applicable local and transit rates of sales or use tax, include the tax in both the “State” and “Food, County & Transit” columns. Retailers should have charged your organization this rate on purchases of prepared food, soft drinks, dietary supplements, and candy.

Certain local jurisdictions impose an additional 1% food and beverage tax. You cannot include this tax on your refund claim form. You must remove the additional tax from your refund claim.

Example: A qualifying nonprofit organization in Wake County purchased prepared food for use in providing its nonprofit service. The restaurant charged $100 for the food and $8.25 in ‘tax’ on the invoice. The combined state, county, and transit rates of sales and use tax in Wake County is 7.25%. The nonprofit can only include $7.25 of tax from this purchase on its refund claim form because the additional $1.00 of tax is a local food and beverage tax.

No. Reimbursements to individuals or employees for purchases of travel expenses including food and lodging paid by the individuals or employees cannot be included in the refund claim.

No.

No.

No.

No.

No.

No.

You should only use line 4 if the qualifying organization indirectly paid sales and use tax on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the nonprofit entity and is being erected, altered, or repaired for use by the nonprofit entity for carrying on its nonprofit activities.

Example: A nonprofit organization owns a medical clinic where it provides services. The nonprofit hired a contractor to remodel the clinic. The contractor purchased materials that are used to construct the walls of the clinic. The nonprofit may include the sales and use tax paid on the sheetrock on Line 4 if it obtains proper documentation from the contractor.

Enter in the State column the total state sales and use tax paid indirectly on qualifying purchases of building materials and supplies as shown on real property contractors’ statements.

Enter in the Food, County & Transit column the total county and/or transit sale and use tax paid indirectly on qualifying purchases of building materials and supplies as shown on real property contractors’ statements.

This line would be zero if the organization is not in a building program and/or has not paid sales or use tax indirectly through a real property contractor.

To substantiate a refund claim for sales and use taxes paid on qualifying purchases of building materials, supplies, fixtures, and equipment by its real property contractor or other person (“contractor”), the applicant must secure from such contractor certified statements setting forth specific required information. A certified statement is a statement that is signed by the contractor/owner, a corporate officer, or an employee of the contractor who is authorized to provide the information. The certified statement must include all of the following information:

• The date the property was purchased.
• The type of property purchased.
• The name of the retailer from whom the purchase was made and the invoice number of the purchase.
• The purchase price of property purchased and the amount of sales and use tax paid thereon.
• The project for which the property was used.
• If the property was purchased in this state, a copy of the sales receipt and the statement must include the county in which it was delivered.
• If the property was not purchased in this state, the county in North Carolina in which the property was used must be included.

In the event the contractor makes several purchases from the same retailer, such certified statement must indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices, and the general state, applicable local and transit rates of sales and use taxes paid thereon. The certified statement must also include the purchase price of any tangible personal property withdrawn from the contractor’s warehouse stock and the amount of the general state, applicable local and applicable transit rates of sales and use tax paid thereon by the contractor. Similar certified statements by the contractor’s subcontractors must be obtained by the general contractor and furnished to the applicant. Any payment of applicable local and applicable transit sales and use taxes included in the contractor’s certified statements must be shown separately from the state sales and use taxes paid.

The contractor’s certified statements must not contain sales and use taxes paid on purchases of tangible personal property purchased by such contractors for use in performing the contract which does not annex to, affix to, or in some manner become a part of the building or structure that is owned by the applicant.

Examples of property on which sales and use tax has been paid by the contractor and which shall not be included in the contractor’s certified statement are scaffolding, forms for concrete, fuel for the operation of machinery and equipment, tools, equipment, equipment repair parts, and equipment rentals. Sales and use tax paid on these items are not eligible for refund.

If the organization has a use tax account and pays use tax directly to the Department of its qualifying purchases for use upon which no tax was charged or paid, complete this line.

Enter in the State column the total state use tax paid to the Department by the organization on its sales and use tax returns. Enter the Food, County & Transit column the total food, county and/or transit use tax paid to the Department by the organization on its sales and use tax returns.

Do not include tax collected and remitted to the Department on taxable sales made by the organization.

A use tax is an excise tax levied on the following items:

• Taxable tangible personal property, including property that becomes part of a building or another structure, purchased leased, or rented inside or outside this state for storage, use, or consumption in this state;
• Certain digital property purchased inside or outside this state for storage, use, or consumption in this state; and
• On services sourced to this state.

For additional information review the Use Tax Overview webpage.

No.

1. Add the state tax on Lines 3, 4, and 5 and enter the total in the state column.
2. Add the food, county, and transit tax on Lines 3, 4, and 5 and enter the total in the Food, County & Transit column.
3. If the organization made qualifying purchases and paid county and/or transit tax in more than one county, the organization must complete Form E-536R, Schedule of County Sales and Use Taxes for Claims for Refund, to identify the individual counties to which county and/or transit tax was paid.

Add the amounts in the State column and the Food, County & Transit column on Line 6 and enter this total on Line 7. This is the total amount of refund the organization is requesting.

Allocate the amount of food, county, and transit tax included on Line 6 in the Food, County & Transit column to the applicable rate(s) on Line 8. The total of the amounts listed on Line 8 should equal the amount under the Food, County & Transit column on Line 6. If required to complete Form E-536R, Schedule of County Sales and Use Taxes for Claims for Refund, the amounts entered on Line 8 must equal the total amounts entered on Form E-536R.

Complete Form E-536R only if the organization made purchases and paid county and/or transit tax in more than one county.

To complete Form E-536R, identify the amount of county and/or transit tax that was paid in each county. 

• Enter the amount (s) in the block(s) next to the appropriate taxing county. Generally, taxes are attributed to the county where delivery occurs. (If taxable tangible personal property, services, or digital property is sourced or purchased for storage, use, or consumption to the organization in County A, then County A is attributed the county and/or transit tax.) For further detailed information on sourcing provisions review G.S. § 105-164.4B.
• Enter, if applicable, the 2% food tax paid on qualifying purchases of food other than prepared food, soft drinks, dietary supplements, and candy.
• Enter, if applicable, the 0.5% Transit Tax paid on qualifying purchases of tangible personal property, services, or digital property sourced into or purchased for storage, use, or consumption in Durham, Mecklenburg, Orange, and Wake counties.

The total of all entries made on Form E-536R should equal the food, county, and transit tax amount shown on Line 6 in the Food, County & Transit column of Form E-585.