Governmentals in General

In North and South Carolina, local governments need to be aware that they can utilize exemptions and exclusions enjoyed by manufacturers, if they are involved in drinking water production or the production of other products for sale. It is particularly important in South Carolina because, unlike North Carolina, South Carolina municipalities are not refundable entities and are not entitled to periodic refunds. Municipalities which sell electricity or gas should accrue the sales tax on withdrawals based on their cost of rather than the normal selling price. In both states, planning ahead can reduce the sales or use tax liability on certain purchases retaining funds for other expenditures. (Please look at the information on "Software Issues" found on our "Corporations page"). In South Carolina, state agencies are not exempt from the sales or use tax other than their manufacturing activities.

North Carolina Governmentals

North Carolina municipalities are allowed to recover sales and use taxes paid to vendors, use tax accrued and paid directly to the NC Department of Revenue on purchases and sales and use tax paid on materials by contractors and subcontractors making repairs and additions to real property. The sales tax charged by NC municipalities on electricity and other items is not refundable. Purchases by employees using their own funds which are later reimbursed are not recoverable. Tax on employee purchases where a governmental issued credit card is used is refundable. Tax arising from the use of petty cash is refundable. In North Carolina, state agencies are exempt from the sales and use tax but should file refund claims for sales tax paid by contractors and service providers. The refunds claimed by State agencies on contractor billings are refunded to the general fund and not back to the filing agency. Only local sales taxes are refunded to State agencies

Federal Government

In all states, sales to the federal government are not subject to state or local taxation. Federal agencies however, doing business in the Carolinas need to monitor construction contracts because the tax paid by the contractors is refundable in North Carolina and exempt in South Carolina, when proper steps are taken to allow purchases made by the contractor and its subcontractors are to be on an "agency" basis making purchases in behalf of the federal government.