Sales Tax Exemption Questions & Answers
Question #1
What is the authority for NC State University's sales 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. Click for documentation
on sales tax exemption.
Question #2
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:
1. Prepared food and beverage taxes levied and administered by various
local governments in the State.
2. Occupancy taxes on hotel/motel lodging
3. Highway use taxes on the purchase, lease, or rental of motor
vehicles
4. State sales taxes levied on electricity or telecommunication
services
5. Scrap tire disposal tax on new tires
6. White goods disposal tax on new white goods
7. Dry-cleaning solvent tax on dry-cleaning solvent purchased by
a dry-cleaning facility.
8. Excise tax on piped natural gas.
Question #3
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.
Question #4
Why are payments to employees and other individuals for reimbursement
not 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.
Question #5
When does the exemption go into effect?
July 1, 2004. Qualifying goods/services received on or after this
date are exempt from sales tax paid directly by NC State University.
Question #6
What steps has the University taken to notify vendors that we
are exempt from sales tax?
The University has taken the following steps:
1. A sales tax exemption notification letter was sent on June 11,
2004 to every vendor that has been paid by a University Accounts
Payable check over the past eighteen months.
2. A statement informing the vendor of NC State University's tax
exemption and tax exempt number will be printed on all payee check
stubs beginning on July 1, 2004.
3. All new Purchase Orders processed on and after May 15, 2004 have
included the tax-exempt number printed on the face of the purchase
order.
4. A 3D letter was sent to campus on June 4, 2004 providing instructions
when placing orders for goods/services to be received after June
30, 2004.
5. New P-cards will be issued the week of June 28, 2004 with the
University's sales tax exempt number on the card.
6. The Notification of the University's Sales Tax Exemption from
the Department of Revenue has been posted on the University Controller's
and Materials Management WEB site.
Question #7
How does the campus community make sure that the vendor knows
we are exempt from sales tax and has our sales tax exempt number?
At the time an order is placed, the person placing the order should
inform the vendor that the University is exempt from sales tax and
provide them with the tax-exempt number. If necessary, a copy of
the notification letter from the NC
Department of Revenue can be provided to the vendor.
Question #8
How will vendors paid through P-card transactions be notified
of our sales tax exempt number?
Again, the person placing the order should make sure the vendor
has been notified of our sales tax exemption. This is done by (1)
showing the P-card to the vendor (P-card has NC State University's
tax exempt number on it), (2) indicating the tax-exempt information
in the comment section of the order form if available, or (3) contacting
a sales representative through the vendor's WEB site messaging process
or by telephone. The person placing the order should review the
completed order to make sure that sales tax has not been added.
If tax has been added, the person placing the order should contact
the vendor's sales representative for adjustment.
Question #9
If goods are received prior to 7/1/04 but payment is on 7/1/04
or later, do we have to pay the tax?
Yes. If goods are received, or title for the goods passes prior
to 7/1/04, sales or use tax must be paid on the item.
Question #10
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.
Question #11
Can the department reimburse employees for tax on items purchased
by the employee for work related expenditures?
Reimbursement of tax paid by an employee for work expenditures will
be at the discretion of the department.
Question #12
Should NC State University pay sales tax if it is charged on
invoices for goods received after 6/30/04?
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.
Question #13
What happens if NC State University mistakenly pays sales tax
on purchases made after 6/30/04?
The University will have to resolve this with the vendor. The Department
of Revenue will not refund any sales tax paid in error to a vendor.
Question #14
Will there be a Budget impact because of the sales tax exemption?
Yes. The State Appropriated budget will be reduced based on an estimated
savings resulting for the sales and use tax exemption.
Question #15
Can departments use State or Federal funds to pay for sales tax
on employee reimbursements?
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.
Question #16
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.
Question #17
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, please provide our Tax Accountant (Milburn
Holbrook at 515-3823) 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 we can work with the Vendor
to obtain a refund for the sales tax paid. We will notify you when
refunds are received and distribute them to the proper account.
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.
Question #18
Is NCSU 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.
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