North Carolina law does not exempt nonprofit organizations from payment of sales and use tax on items they purchase for use. However, North Carolina nonprofits may apply for semiannual refunds of sales and use tax paid by qualified organizations on direct purchases of tangible personal property, digital property, and services for use in carrying out their mission.

Nonprofit organizations eligible for sales tax refunds should file a Form E585, Nonprofit and Governmental Entity Claim for Refund State, County, and Transit Sales and Use Taxes. Included on the form should be:

  • Sale or use tax paid to vendors
  • Use tax accrued and remitted to the NC Department of Revenue
  • Certain tax indirectly paid per contractors’ statements on the refund claim

To be eligible for sales and use tax refunds, nonprofit organizations should provide the following information to the NC Department of Revenue:

  1. A copy of the organization’s 501(c)(3) letter issued to the organization by the IRS.
  2. The Federal Employer Identification Number (EIN) issued by the IRS or a statement advising that the organization has not been assigned an EIN.
  3. The organization’s National Taxonomy of Exempt Entities (NTEE) code issued by the IRS.
  4. If the organization is incorporated, it should furnish a complete copy of its Articles of Incorporation and its Bylaws. If the organization if not incorporates, it should furnish a copy of its Bylaws.

Claims for sales tax refunds are filed semiannually. Claims for the first semiannual period, January 1 through June 30, must be filed by October 15 of the same year and claims for the second semiannual period, July 1 through December 31, should be filed by April 15 of the following year. If an organization falls behind on their filings, refund claims can be filed up to three years past the original due date.

Receipts and invoices do not need to be mailed in with the Form E585, but the organization should retain receipts and invoices for three years beyond the date the refund is claimed.

Taxes paid on the following are nonrefundable and should be excluded from Form E585:

  • Electricity
  • Piped natural gas
  • Telecommunications and ancillary services
  • Video programming
  • Prepaid meal plans
  • Purchase, lease, or rental of motor vehicles
  • Local occupancy or local prepared food and beverage taxes
  • Scrap tire disposal or white goods disposal taxes
  • Reimbursements for travel expenses
  • Alcoholic beverages
  • Digital property

Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.

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Lindsay Lang - Greensboro CPA Firm

Lindsay Lang, CPA