Frequently Asked Questions about Sales Tax
Frequently asked questions about the university’s sales tax exemption and understanding which purchases, payments, or reimbursements are not tax-exempt can be found below.
What is the authority for North Carolina State University’s sales and use tax exemption?
The sales tax exemption is the result of Senate Bill 100 passed by the 2003 Session of the General Assembly of North Carolina.
When did the exemption take effect?
July 1, 2004. Qualifying goods/services received on or after this date are exempt from sales tax paid directly by NC State University.
What is the scope of the sales tax exemption?
The sales tax exemption applies to North Carolina sales tax on all direct purchases of tangible items made by the University. This includes purchases made via a Small Purchase Voucher, Purchase Order, P-Card Transaction or electronic transfer. The exemption from tax does not apply to the following taxes; these taxes must be paid to the vendor:
- Prepared food and beverage taxes levied and administered by various local governments in the State.
- Occupancy taxes on hotel/motel lodging
- Highway use taxes on the purchase, lease, or rental of motor vehicles
- State sales taxes levied on electricity or telecommunication services
- Scrap tire disposal tax on new tires
- White goods disposal tax on new white goods
- Dry-cleaning solvent tax on dry-cleaning solvent purchased by a dry-cleaning facility.
- Solid waste disposal tax levied on the disposal of municipal solid waste and construction debris
- Other states’ sales and use tax paid to those states (unless NCSU has an exemption in that state-See Controller’s Sales and Use Tax Page)
- 911 service charge levied on the sale of prepaid wireless telecommunications service.
What does the exemption mean to NC State University?
The exemption means that all payments made to vendors using a University Check (written on any checking account in the name of NC State University), a University issued P-Card, or an electronic transfer through NC State University banks are exempt from sales tax except as discussed in question #2. Payments made to employees and other individuals for reimbursement of expenses are not exempt from sales tax.
Why are payments to employees and other individuals for reimbursement not tax exempt?
The State Law applies only to payments made directly to vendors by the University. Reimbursement to employees and other individuals are not direct payments to vendors.
If an employee purchases something for work purposes using their own funds, will that purchase be exempt from tax?
No. Purchases of taxable items by employees, which are reimbursed by NC State, are not eligible for sales and use tax exemption.
Can the department reimburse employees for tax on items purchased by the employee for work related expenditures?
Yes, if charged to the appropriate project and college approved. It is up to the College/Department to decide whether to allow reimbursements for sales tax paid. Colleges/Departments should review their methods for vendor payments including employee reimbursements to ensure that direct payments (payment by NCSU check or P-Card) are made to vendors as much as possible.
Can the departments use State or Federal funds to pay for sales tax on employee reimbursements?
Sales tax is reimbursable on any funding source. There are no restrictions.
Should NC State pay sales tax if its charged on invoices for goods received after 6/30/2004?
No. Tax should not be paid on invoices for goods purchased or received after 6/30/04. If tax is included on the invoice, the campus department should contact the vendor, provide them with a copy of our tax-exempt documentation and request a revised invoice.
What happens if NC State University mistakenly pays sales tax on purchases?
If the University mistakenly pays sales tax the department must work with the vendor to be issued a refund. The University can not obtain a refund by any other methods.
How can the Colleges/Departments ensure that their methods of vendor payment result in an efficient use of funds?
Colleges/Departments should review their methods of payment for vendor purchases and reduce as much as possible payments that are not sales tax exempt, such as employee reimbursements. In place of employee reimbursements, Colleges/Departments may consider establishing credit accounts with vendors or use a P-Card for expenses that employees would normally be reimbursed for. These types of credit arrangements must be coordinated with the University’s Purchasing / Materials Management Office (contact Blain Woods at 515-6885). As always, Good Business Practices must be used by the College/Department to ensure credit account expenses have been properly approved, documented and reconciled.
How can food/supplies be purchased from a grocery/supply store and the purchase be exempt from sales tax?
First of all, you must either use an NCSU check, P-Card, or charge account. Employee reimbursements are not exempt from sales tax.
Make sure that you contact the grocery/supply store in advance to understand their procedures. Some stores require forms to be completed while others will simply need our tax-exempt number.
If, after presenting the sales tax exempt letter and your P-Card (with the tax-exempt number printed on the card), you are still charged sales tax, the department must try to obtain a refund first. If vendor refuses to provide refund, then please contact our Tax Accountant (Misty Wilson (Bauguess) at 515-7460) with a copy of the receipt, the names of the persons you presented our sales tax exempt number too and any other pertinent information related to the purchase (such as project and account paid from) so that an effort can be made to directly work with the Vendor to obtain a refund for the sales tax paid. We will notify you if able to obtain a refund and distribute them to the proper account. Often times, vendors will not refund the University for tax paid on a prior item.
The exemption only applies to sales tax on food purchases. NCSU is not exempt from the prepared food and beverage taxes administered by local counties and municipalities. For example, Wake County imposes a 1% tax prepared food and beverages. This tax is administered by the county and is not subject to the exemption.
Is NC State University exempt from tax paid on the lease or rental of motor vehicles?
No. The tax paid on the lease or rental of motor vehicles is considered a highway use tax and is not subject to the exemption.