Nonprofit Sales and Use Tax Information

North Carolina law does not exempt nonprofits from payment of sales and use tax on items they purchase for use or consumption. A nonprofit must pay the applicable rates of sales or use tax to the seller when it makes these purchases. However, certain nonprofits are allowed a semiannual refund of North Carolina sales and use tax paid by them on direct purchases of items for use in carrying on their nonprofit work.

Internal Revenue Code § 501(c)(3) lists the most common nonprofit organizations. These organizations may be established for the following purposes: religious, educational, charitable, scientific, literary, testing for public safety, fostering certain national or international amateur sports competitions, or prevention of cruelty to children or animals. 

Register a Nonprofit Organization for Refund Claims

A nonprofit must register with the Department using Form E-585NPA, Application for Nonprofit Sales and Use Tax Refund Account ID, in order to receive a refund claim account ID.

How to Submit a Claim for Refund?

A nonprofit organization eligible for refund under the provisions of G.S. § 105-164.14(b) may file Form E-585, Nonprofit and Governmental Entity Claim for Refund State, County, and Transit Sales and Use Taxes. The nonprofit should include sales and use tax it paid directly to sellers and use tax accrued and remitted to the Department.  Sales and use tax liability indirectly incurred through reimbursement to an authorized person of the nonprofit for the purchase of items for use in carrying on the work of the nonprofit qualifies for refund. The food, county, and transit sales or use taxes must be separately stated on the claim for refund. If the nonprofit seeks a refund of tax paid to more than one county, or tax paid to a county other than the county where the nonprofit is located, the nonprofit must complete and attach Form E-536R, Schedule of County Sales and Use Taxes for Claims for Refund, showing the amount of each county's tax separately. Claims for refund must be substantiated by proper documentary proof and only the taxes actually paid by the nonprofit during the period for which the claim is filed may be included. Sales tax collected and remitted on taxable sales made by the nonprofit must not be included.

Claims for refund are filed semiannually. The claim for refund of sales and use taxes paid during the period January 1 through June 30 is due to be filed by October 15 of the same year. The claim for refund for the period July 1 through December 31 is due to be filed by April 15 of the following year. Claims for refund which are filed more than three years after the due date are barred by statute. 

Taxes paid on any of the following items are nonrefundable: 

• Electricity.
• Piped natural gas.
• Telecommunications and ancillary services.
• Video programming.
• Prepaid meal plans.
• The purchase, lease, rental, or subscription of motor vehicles.
• Local occupancy or local prepared food and beverage taxes.
• Scrap tire disposal or white goods disposal taxes.
• Reimbursements for travel expenses.
• Alcoholic beverages.
• Transportation commerce tax.

Sales by Nonprofit Organizations

Generally, a nonprofit making retail sales must collect and remit the applicable sales and use tax due to the Department. Before making retail sales, a nonprofit must obtain a Certificate of Registration by registering online through the Online Business Registration Portal or by mailing a completed Form NC-BR, Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Other Taxes and Service Charge, to the Department. This sales tax account number is a different number than the number assigned for refund claims.  The nonprofit must collect and remit the sales and use tax due on its retail sales unless the sales are specifically exempt by statute. There is no fee for registering. The tax remitted to the Department by the nonprofit on retail sales should not be included in its refund claim.

How do I Learn More?

• Sales and Use Tax Bulletin 62 - Nonprofits
• Frequently Asked Questions - Nonprofit Sales and Use Tax Refunds
• State Taxation and Nonprofit Organizations Publication