Nonprofit Sales Tax Exemption.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 755

Short Title: Nonprofit Sales Tax Exemption. (Public)
Sponsors: Representatives Lofton and Ross (Primary Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Rules, Calendar, and Operations of the House
April 7, 2025
*H755-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO PROVIDE A SALES TAX EXEMPTION FOR CERTAIN NONPROFI T 2
ENTITIES. 3
The General Assembly of North Carolina enacts: 4
SECTION 1. G.S. 105-164.14(b) is repealed. 5
SECTION 2. G.S. 105-164.13 reads as rewritten: 6
"§ 105-164.13. Retail sales and use tax. 7
The sale at retail and the use, storage, or consumption in this State of the following tangible 8
personal property, digital property, and services are specifically exempted from the tax imposed 9
by this Article: 10
… 11
(52a) Tangible personal property, digital property, and services for use in carrying 12
on the work of the following entities, provided the entity is not owned or 13
controlled by the State: 14
a. Hospitals not operated for profit, including hospitals and medical 15
accommodations operated by an authority or other public hospital 16
described in Article 2 of Chapter 131E of the General Statutes. 17
b. An organization that is exempt from income tax under section 18
501(c)(3) of the Code and not classified in the National Taxonomy of 19
Exempt Entities ma jor group areas of (i) Community Improvement 20
and Capacity Building, (ii) Public and Societal Benefit, or (iii) Mutual 21
and Membership Benefit. 22
c. Volunteer fire departments and volunteer emergency medical services 23
squads that are (i) exempt from income tax under the Code, (ii) 24
financially accountable to a city as defined in G.S. 160A-1, a county, 25
or a group of cities and counties, or (iii) both. 26
d. An organization that is a single member LLC that is disregarded for 27
income tax purposes and satisfies all of the following conditions: 28
1. The owner of the LLC is an organization that is exempt from 29
income tax under section 501(c)(3) of the Code. 30
2. The LLC is a nonprofit entity that would be eligible for an 31
exemption under section 501(c)(3) of the Code if it were n ot 32
disregarded for income tax purposes. 33
3. The LLC is not an organization that would be properly 34
classified in any of the major group areas of the National 35
General Assembly Of North Carolina Session 2025
Page 2 House Bill 755-First Edition
Taxonomy of Exempt Entities listed in sub -subdivision b. of 1
this subdivision. 2
e. Qualified retiremen t facilities whose property is excluded from 3
property tax under G.S. 105-278.6A. 4
f. A university-affiliated nonprofit organization that procures, designs, 5
constructs, or provides facilities to, or for use by, a constituent 6
institution of The University of North Carolina. For purposes of this 7
sub-subdivision, a nonprofit organization includes an entity exempt 8
from taxation as a disregarded entity of the nonprofit organization. 9
g. Over-the-counter drugs purchased for use in carrying out the work of 10
a hospital not listed in one of the sub-subdivisions of this subdivision. 11
This exemption provided in this subdivision includes indirect sales to a 12
nonprofit entity of digital property and tangible personal property purchased 13
by a real property contractor that becomes a part of or permanently installed 14
or applied to any building or structure that is owned or leased by the nonprofit 15
entity and is being erected, altered, or repaired for use by the nonprofit entity 16
for carrying on its nonprofit activities. A sale to fulfill a real property contract 17
with an entity that holds an exemption certificate is exempt to the same extent 18
as if purchased directly by the entity that holds the exemption certificate. A 19
real property contractor that purchases an item allowed an exemption under 20
this subdivision must provide (i) an exemption certificate to the retailer that 21
includes the name of the nonprofit entity holding the ex emption certificate, 22
(ii) the exemption certificate number issued to that holder , and (iii) the 23
information required pursuant to G.S. 105-164.28. 24
The exemption provided in this subdivision does not apply to (i) purchases 25
of electricity, telecommunications service, ancillary service, piped natural gas, 26
video programming, a prepaid meal plan, aviation gasoline and jet fuel, and 27
spirituous liquor or (ii) sales and use tax liability indirectly paid by a nonprofit 28
entity through reimbursement to an authorized person of the entity for tax 29
incurred by the person on an item or transaction subject to tax under Article 5 30
of this Chapter. 31
The aggregate annual exemption amount allowed to an entity under this 32
subdivision for a fiscal year may not exceed thirty-one million seven hundred 33
thousand dollars ($31,700,000) in tax. A real property contractor who pays 34
local sales and use taxes on property qualifying for an exemption under this 35
subdivision on behalf of an entity shall give the entity for whose project the 36
property was purchased a signed statement containing (i) the date the property 37
was purchased, (ii) the type of property purchased, (iii) the project for which 38
the property was used , (iv) i f the property was purchased in this State, the 39
county in which it was purchased , and (v) if the property was not purchased 40
in this State, the county in which the property was used . If the property was 41
purchased in this State, the real property contractor shall attach a copy of the 42
sales or purchase receipt to the statement. 43
…." 44
SECTION 3. Article 5 of Chapter 105 of the General Statutes is amended by adding 45
a new section to read: 46
"§ 105-164.29C. Nonprofit entity exemption process. 47
(a) Application. – To be eligible for the exemption provided in G.S. 105-164.13(52a), a 48
nonprofit entity must obtain from the Department a sales tax exemption number. The application 49
for exemption must be in the form required by the Secretary, be signed by a person with authority 50
General Assembly Of North Carolina Session 2025
House Bill 755-First Edition Page 3
to bind the entity , and contain any information required by the Secretary. The Secretary must 1
assign a sales tax exemption number to a nonprofit entity that submits a proper application. 2
(b) Liability. – A nonprofit entity that does not use the items purchased with its exemption 3
number must pay the tax that should have been paid on t he items purchased, plus interest 4
calculated from the date the tax would otherwise have been paid." 5
SECTION 4. G.S. 105-467(b) reads as rewritten: 6
"(b) Exemptions and Refunds. – The State exemptions and exclusions contained in Article 7
5 of Subchapter I of this Chapter, except for the exemption for food in G.S. 105-164.13B, apply 8
to the local sales and use tax authorized to be levied and imposed under this Article. The State 9
refund provisions contained in G.S. 105-164.14 and G.S. 105-164.14A apply to the lo cal sales 10
and use tax authorized to be levied and imposed under this Article. A refund of an excessive or 11
erroneous State sales tax collection allowed under G.S. 105-164.11 and a refund of State sales 12
tax paid on a rescinded sale or cancelled service contr act under G.S. 105-164.11A apply to the 13
local sales and use tax authorized to be levied and imposed under this Article. The aggregate 14
annual local refund exemption amount allowed an entity under G.S. 105-164.14(b) 15
G.S. 105-164.13(52a) for the State's fiscal year may not exceed thirteen million three hundred 16
thousand dollars ($13,300,000). 17
Except as provided in this subsection, a taxing county may not allow an exemption, exclusion, 18
or refund that is not allowed under the State sales and use tax. A local school administrative unit 19
and a joint agency created by interlocal agreement among local school administrative units 20
pursuant to G.S. 160A-462 to jointly purchase food service -related materials, supplies, and 21
equipment on their behalf is allowed an annual refund of sales and use taxes paid by it under this 22
Article on direct purchases of tangible personal property and services. Sales and use tax liability 23
indirectly incurred by the entity as part of a real property contract for real property that is owned 24
or leased by the entity and is a capital improvement for use by the entity is considered a sales or 25
use tax liability incurred on direct purchases by the entity for the purpose of this subsection. The 26
refund allowed under this subsection does not apply to purchases of electricity, 27
telecommunications service, ancillary service, piped natural gas, video programming, or a 28
prepaid meal plan. A request for a refund is due in the same time and manner as provided in 29
G.S. 105-164.14(c). Refunds applied for more than three years after the due date are barred." 30
SECTION 5. G.S. 105-236(a)(5a) reads as rewritten: 31
"(5a) Misuse of Exemption Certificate. – For misuse of an exemption certificate by 32
a purchaser, the Secretary shall assess a penalty equal to two hundred fift y 33
dollars ($250.00). An exemption certificate is a certificate issued by the 34
Secretary that authorizes a retailer to sell tangible personal property to the 35
holder of the certificate and either collect tax at a preferential rate or not collect 36
tax on the sa le. Examples of an exemption certificate include a certificate of 37
exemption, a direct pay certificate, and a conditional exemption certificate. 38
Misuse under this subdivision includes improper use of a certificate of 39
exemption issued to a nonprofit entity pursuant to G.S. 105-164.29C for direct 40
and indirect purchases by the entity or another person." 41
SECTION 6. This act becomes effective October 1, 2025, and applies to sales and 42
purchases made on or after that date. This act does not affect the rights or liabilities of the State, 43
a taxpayer, or another person arising under a statute amended or repealed by this act before the 44
effective date of its amendment or repeal, nor does it affect the right to any refund or credit of a 45
tax that accrued under the amended or repealed statute before the effective date of its amendment 46
or repeal. 47