North Carolina Repeals 1% Privilege Tax for Manufacturing Machinery

North Carolina Repeals 1% Privilege Tax for Manufacturing Machinery

By Rhonda F. Skiles, CPA, Partner

The 2017 North Carolina legislative session brought about many changes to revenue laws.  One of the changes is the repeal of Article 5F of Chapter 105, better known as the privilege tax for qualifying mill machinery, parts and accessories used in the manufacturing process.  The repeal is effective July 1, 2018.  These items also remain exempt from North Carolina sales and use tax.  Therefore, beginning July 1, 2018, qualifying mill machinery, parts and accessories sold to manufacturers for use in the manufacturing process will be exempt from both the North Carolina sales and use tax and the privilege tax.

Beginning July 1, 2018, additional definitions for sales of qualifying mill machinery were added to include:

  • Mill machinery or mill machinery parts or accessories sold to any manufacturing industry or plant, a contractor or subcontractor if the purchase is for use in the performance of a contract with a manufacturing industry or plant
  • Qualifying items sold to a major recycling facility
  • Qualifying equipment sold to a company primarily engaged in research and development included in NAICS industry group 54171
  • Qualifying equipment sold to a company primarily engaged in software publishing activities included in NAICS industry group 5112
  • Qualifying equipment sold to a company primarily engaged in industrial machinery refurbishing activities included in NAICS industry group 811130
  • Qualifying items sold to a company located at a ports facility for waterborne commerce
  • Qualifying items and utilities sold to a secondary metals recycler
  • Qualifying equipment sold to a company primarily engaged in extracting precious metals
  • Qualifying equipment sold to a company engaged in the fabrication of metal work
  • Repair or replacement parts for a ready-mix concrete mill
  • Qualifying equipment sold to a qualifying large fulfillment facility

The North Carolina Department of Revenue issued a notice on April 9, 2018 stating that a final Form E-500J, Machinery and Equipment Tax Return, should be filed for the month or quarter ending June 30, 2018, depending on the previously established filing frequency for the privilege tax account.  The Department of Revenue will close all active machinery and equipment accounts, so there is no need to submit an Out of Business Notification with the final return.  If a taxpayer discovers it made an overpayment of the 1% privilege tax for a period ending on or before June 30, 2018, Form E-588J, Claim for Refund, should be used to request a refund, subject to the current statute of limitations.

Rhonda Skiles

Rhonda F. Skiles Tax Partner, CPA

Rhonda is a Partner at our firm and has 25 years of experience in public and private accounting. She works extensively within the affordable housing industry advising management companies, owners and developers. In addition to overseeing tax filings to ensure compliance with various taxing authorities, she is responsible for identifying and resolving the complex […]