North Carolina § 105-164 - 13E. Exemption for farmers.

§ 105-164. 13E. Exemption for farmers.

Exemption. - A qualifying farmer is a person who has an annual income from farming operations for the preceding taxable year of ten thousand dollars ($10,000) or more or who has an average annual income from farming operations for the three preceding taxable years of ten thousand dollars ($10,000) or more. For purposes of this section, the term "income from farming operations" means sales plus any other amounts treated as gross income under the Code from farming operations. A qualifying farmer includes a dairy operator, a poultry farmer, an egg producer, and a livestock farmer, a farmer of crops, a farmer of an aquatic species, as defined in G.S. 106-758, and a person who boards horses. A qualifying farmer may apply to the Secretary for an exemption certificate number under G.S. 105-164.28A. The exemption certificate expires when a person fails to meet the income threshold for three consecutive taxable years or ceases to engage in farming operations, whichever comes first. Fuel, piped natural gas, and electricity that are measured by a separate meter or another separate device and used for a purpose other than preparing food, heating dwellings, and other household purposes. Commercial fertilizer, lime, land plaster, plastic mulch, plant bed covers, potting soil, baler twine, and seeds. Farm machinery, attachment and repair parts for farm machinery, and lubricants applied to farm machinery. The term "machinery" includes implements that have moving parts or are operated or drawn by an animal. The term does not include implements operated wholly by hand or motor vehicles required to be registered under Chapter 20 of the General Statutes. A container used in the planting, cultivating, harvesting, or curing of farm crops or in the production of dairy products, eggs, or animals or used in packaging and transporting the farmer's product for sale. A grain, feed, or soybean storage facility and parts and accessories attached to the facility. Any of the following substances when purchased for use on animals or plants, as appropriate, held or produced for commercial purposes: Remedies, vaccines, medications, litter materials, and feeds for animals. Rodenticides, insecticides, herbicides, fungicides, and pesticides. Defoliants for use on cotton or other crops. Plant growth inhibitors, regulators, or stimulators, including systemic and contact or other sucker control agents for tobacco and other crops. Semen. Any of the following animals: Baby chicks and poults. Livestock. Any of the following items concerning the housing, raising, or feeding of animals: A commercially manufactured facility to be used for commercial purposes for housing, raising, or feeding animals or for housing equipment necessary for these commercial activities. The exemption also applies to commercially manufactured equipment, and parts and accessories for the equipment, used in the facility. Building materials, supplies, fixtures, and equipment that become a part of and are used in the construction, repair, or improvement of an enclosure or a structure specifically designed, constructed, and used for housing, raising, or feeding animals or for housing equipment necessary for one of these commercial activities. The exemption also applies to commercially manufactured equipment, and parts and accessories for the equipment, used in the enclosure or a structure. A bulk tobacco barn or rack, parts and accessories attached to the tobacco barn or rack, and any similar apparatus, part, or accessory used to cure or dry tobacco or another crop. Repair, maintenance, and installation services. (Effective for taxes imposed for taxable years beginning before July 1, 2017) Conditional Exemption. - A person who does not meet the definition of a qualifying farmer in subsection (a) of this section may apply to the Department for a conditional exemption certificate under G.S. 105-164.28A. A person with a conditional exemption certificate is allowed to purchase items exempt from sales and use tax to the same extent as a qualifying farmer under subsection (a) of this section. To receive a conditional exemption certificate under this subsection, the person must certify that the person intends to engage in farming operations, as that term is described in subsection (a) of this section, and that the person will timely file State and federal income tax returns that reflect income and expenses incurred from farming operations during the taxable years that the conditional exemption certificate applies. (Effective for taxes imposed for taxable years beginning on or after July 1, 2017) Conditional Exemption. - A person who does not meet the definition of a qualifying farmer in subsection (a) of this section may apply to the Department for a conditional exemption certificate under G.S. 105-164.28A. A person with a conditional exemption certificate is allowed to purchase items exempt from sales and use tax to the same extent as a qualifying farmer under subsection (a) of this section. To receive a conditional exemption certificate under this subsection, the person must certify that the person intends to engage in farming operations, as that term is described in subsection (a) of this section, and that the person will timely file State and federal income tax returns that reflect income and expenses incurred from farming operations during the taxable years that the conditional exemption certificate applies. The person holds a conditional exemption certificate that is scheduled to expire within 30 days of an extension request. The person suffers a weather-related disaster that prevents the person from becoming eligible for a qualifying exemption certificate. The person provides the Department all of the following: Documents showing that, but for the disaster, the person would have earned ten thousand dollars ($10,000) or more in gross sales for the year in which the disaster occurred. Documentation of revenues and expenses relating to the damaged crop. An affidavit from a county extension director or FSA county committee that the disaster occurred in the area of the county in which the person farms. Contract with a Farmer. - A qualifying item listed in subdivisions (5), (8), and (9) of subsection (a) of this section purchased to fulfill a contract with a person who holds a qualifying farmer exemption certificate or a conditional farmer exemption certificate issued under G.S. 105-164.28A is exempt from sales and use tax to the same extent as if purchased directly by the person who holds the exemption certificate. A contractor that purchases one of the items allowed an exemption under this section must provide an exemption certificate to the retailer that includes the name of the qualifying farmer or conditional farmer exemption certificate holder and the qualifying farmer or conditional farmer exemption certificate number issued to that holder. Services for Farmer. - A qualifying item listed in subdivision (6) of subsection (a) of this section purchased to fulfill a service for a person who holds a qualifying farmer exemption certificate or a conditional farmer exemption certificate issued under G.S. 105-164.28A is exempt from sales and use tax to the same extent as if purchased directly by the person who holds the exemption certificate. A person that purchases one of the items allowed an exemption under this subsection must provide an exemption certificate to the retailer that includes the name of the qualifying farmer or conditional farmer and the exemption number issued to the qualifying farmer or conditional farmer by the Department pursuant to G.S. 105-164.28A. A person that purchases an item exempt from tax pursuant to this subsection must maintain records to substantiate that an item is used to provide a service for a person who holds a qualifying farmer exemption certificate or a conditional farmer exemption certificate. Definition. - For purposes of this section, the term "taxable year" has the same meaning as defined in G.S. 105-153.3. Except as otherwise provided in this section, the items exempt under this section must be purchased by a qualifying farmer or conditional farmer and used by the qualifying or conditional farmer primarily in farming operations. For purposes of this section, an item is used by a farmer for farming operations if it is used for the planting, cultivating, harvesting, or curing of farm crops, in the production of dairy products, eggs, or animals, or by a person who boards horses. The items that may be exempt from sales and use tax under this section are: A conditional exemption certificate issued under this subsection is valid for the taxable year in which the certificate is issued and the following two taxable years, provided the person to whom the certificate is issued is engaged in farming and provides copies of applicable State and federal income tax returns to the Department within 90 days following the due date of an income tax return for each taxable year covered by the conditional exemption certificate, including an extension of the due date granted by the Secretary under G.S. 105-263 . A conditional exemption certificate issued under this subsection may not be extended or renewed beyond the original three-year period. The Department may not issue a conditional exemption certificate to a person who has had a conditional exemption certificate issued under this subsection during the prior 15 taxable years. A person who purchases items with a conditional exemption certificate must maintain documentation of the items purchased and copies of State and federal income tax returns that reflect activities from farming operations for the period of time covered by the conditional exemption certificate for three years following the expiration of the conditional exemption certificate. The Secretary may require a person who has a conditional exemption certificate to provide any other information requested by the Secretary to verify the person met the conditions of this subsection. A person who fails to provide the information requested by the Secretary in a timely manner or who fails to meet the requirements of this subsection becomes liable for any taxes for which an exemption under this subsection was claimed. The taxes become due and payable at the expiration of the conditional exemption certificate, and interest accrues from the date of the original purchase. Additionally, where the person does not timely provide the information requested by the Secretary, the misuse of exemption certificate penalty in G.S. 105-236(a) (5a) applies to each seller identified by the Department from which the person made a purchase. A conditional exemption certificate issued under this subsection is valid for the taxable year in which the certificate is issued and the following two taxable years, provided the person to whom the certificate is issued is engaged in farming and provides copies of applicable State and federal income tax returns to the Department within 90 days following the due date of an income tax return for each taxable year covered by the conditional exemption certificate, including an extension of the due date granted by the Secretary under G.S. 105-263 . A conditional exemption certificate issued under this subsection may not be extended or renewed beyond the original three-year period; provided that a person may request a one-year extension of their conditional exemption certificate if the person satisfies all of the following conditions: The Department may not issue a conditional exemption certificate to a person who has had a conditional exemption certificate issued under this subsection during the prior 15 taxable years. A person who purchases items with a conditional exemption certificate must maintain documentation of the items purchased and copies of State and federal income tax returns that reflect activities from farming operations for the period of time covered by the conditional exemption certificate for three years following the expiration of the conditional exemption certificate. The Secretary may require a person who has a conditional exemption certificate to provide any other information requested by the Secretary to verify the person met the conditions of this subsection. A person who fails to provide the information requested by the Secretary in a timely manner or who fails to meet the requirements of this subsection becomes liable for any taxes for which an exemption under this subsection was claimed. The taxes become due and payable at the expiration of the conditional exemption certificate, and interest accrues from the date of the original purchase. Additionally, where the person does not timely provide the information requested by the Secretary, the misuse of exemption certificate penalty in G.S. 105-236(a) (5a) applies to each seller identified by the Department from which the person made a purchase. History (2013-316, s. 3.3(a); 2013-363, s. 11.4; 2014-3, s. 3.1(a); 2015-6, s. 2.13(a); 2016-5, s. 3.12(a); 2016-94, s. 38.5(j); 2017-108, s. 20(a); 2018-5, s. 38.5(k); 2019-6, s. 5.4; 2019-169, s. 3.3( l ), (m); 2020-6, s. 1(a).) Subsection (b) Set Out Twice. - The first version of subsection (b) set out above is effective for taxes imposed for taxable years beginning before July 1, 2017. The second version of subsection (b) set out above is effective for taxes imposed for taxable years beginning on or after July 1, 2017. Editor's Note. - Session Laws 2013-316, s. 3.3(c), makes this section effective July 1, 2014, and applicable to sales made on or after that date. Session Laws 2013-316, s. 9(a), provides: "This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal." Session Laws 2014-3, s. 3.1(d), provides: "A person who has an agricultural exemption certificate number issued prior to July 1, 2014, that meets the requirements of G.S. 105-164.13 E for a qualifying farmer should apply for a new agricultural exemption certificate number before July 1, 2014, for use for qualifying purchases made on or after October 1, 2014. A person that meets the requirements of G.S. 105-164.13 E for a qualifying farmer and who has an agricultural exemption certificate number issued prior to July 1, 2014, may continue to use that agricultural exemption certificate number for qualifying purchases made prior to October 1, 2014." Session Laws 2014-3, s. 3.1(e), provides: "A person who has an agricultural exemption certificate number issued before July 1, 2014, that does not meet the requirements of G.S. 105-164.13 E for a qualifying farmer must give notice to a seller that the person no longer qualifies for an exemption for purchases made on or after July 1, 2014, and the seller must collect any tax due on the sale. A seller that relies on a copy of an agricultural certificate of exemption and meets the requirements of G.S. 105-164.28 is not liable for any tax due on the sale." Session Laws 2014-3, s. 3.1(f), made the amendment to this section by Session Laws 2014-3, s. 3.1(a), applicable to purchases made on or after July 1, 2014. Session Laws 2015-6, 2.13(b), as amended by Session Laws 2016-5, s. 3.12(b), provides in part: "A contractor who paid sales and use tax on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E(c), as enacted by this section, may request a refund from the retailer, and the retailer may, upon issuance of the refund or credit, request a refund for the overpayment of tax under G.S. 105-164.11(a)(1) ." Session Laws 2016-94, s. 38.5( l ), provides: "The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016." Session Laws 2016-94, s. 38.5(q) made subdivision (a)(10) of this section, as added by Session Laws 2016-94, s. 38.5(j), applicable to sales made on or after January 1, 2017. Session Laws 2016-94, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2016.'" Session Laws 2016-94, s. 39.4, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year." Session Laws 2016-94, s. 39.7, is a severability clause. Session Laws 2017-108, s. 21, is a severability clause. Session Laws 2018-5, s. 38.5(aa), provides, in part: "Subsection (k) of this section is effective retroactively to July 1, 2014. A person who paid sales and use tax for a return period ending prior to the date this section becomes law on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E, as amended by subsection (k) of this section, may apply to the Department of Revenue for a refund of any excess tax paid to the extent the refund is the result of the change in the law enacted by subsection (k) of this section. A request for a refund must be made on or before October 1, 2018. Notwithstanding G.S. 105-241.6 , a request for a refund received after this date is barred and the provisions of G.S. 105-164.11 do not apply." Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'" Session Laws 2018-5, s. 39.7, is a severability clause. Session Laws 2020-6, s. 1(e), made the rewriting of subdivision (a)(7) by Session Laws 2020-6, s. 1(a), effective July 1, 2020, and applicable to sales occurring on or after that date. Effect of Amendments. - Session Laws 2013-363, s. 11.4, effective July 1, 2013, substituted "exemption" for "refund" in the last sentence of subdivision (8)b. Session Laws 2014-3, s. 3.1(a), effective July 1, 2014, rewrote the section. See Editor's note for applicability. Session Laws 2015-6, s. 2.13(a), effective July 1, 2014, in the first paragraph of subsection (a), in the first sentence, substituted "annual income from farming operations" for "annual income" twice and deleted "from farming operations" following "or more" twice, inserted the present second sentence, and added "whichever comes first" at the end of the last sentence; substituted "Fuel, piped natural gas, and electricity that are measured" for "Fuel and electricity that is measured" in subdivision (a)(1); in the first sentence in the second paragraph of subsection (b), inserted "is engaged in farming and" following "certificate is issued," substituted "following the due date of an income tax return for" for "following the end of," and added "including an extension of the due date granted by the Secretary under G.S. 105-263 " at the end; and added subsections (c) and (d). Session Laws 2016-5, s. 3.12(a), effective May 11, 2016, in the last sentence of subsection (c), substituted "qualifying farmer or conditional farmer exemption" for "agricultural exemption" twice. Session Laws 2016-94, s. 38.5(j), effective January 1, 2017, added subdivision (a)(10). See editor's note for applicability. Session Laws 2017-108, s. 20(a), effective for taxes imposed for taxable years beginning on or after July 1, 2017, added "provided that a person may request a one-year extension of their conditional exemption certificate if the person satisfies all of the following conditions:" at the end of the second paragraph of subsection (b); added subdivisions (b)(1) through (b)(3); and made a stylistic change. Session Laws 2018-5, s. 38.5(k), in subsection (a), in the first paragraph, substituted "and a livestock farmer, a farmer of crops, a farmer of an aquatic species, as defined in G.S. 106-758 , and a person who boards horses" for "a livestock farmer, a farmer of crops, and a farmer of an aquatic species, as defined in G.S. 106-758 " in the third sentence, and in the second paragraph, substituted "Except as otherwise provided in this section the items exempt under this section must be purchased by a qualifying farmer and used" for "The following tangible personal property, digital property, and services are exempt from sales and use tax if purchased by a qualifying farmer and for use" in the first sentence, and substituted "or animals. The following tangible personal property and services that may be exempt from sales and use tax under this section are as follows:" for "or animals:" at the end; and added subsection (c1). For effective date and applicability, see editor's note. Session Laws 2019-6, s. 5.4, effective March 20, 2019, in subsection (a), in the second paragraph, in the first sentence, substituted "farmer or conditional farmer and used by the qualifying or conditional farmer primarily in" for "farmer and used by the farmer in" near the beginning, inserted "or by a person who boards horses" at the end, and made a minor stylistic change; and substituted "qualifying farmer or conditional farmer and the exemption number issued to the qualifying farmer or conditional farmer" for "purchaser and an exemption number issued to the purchaser" in the second sentence in subsection (c1). Session Laws 2019-169, s. 3.3( l ), (m), effective July 26, 2019, substituted "items" for "following tangible personal property and services" and "are" for "are as follows" in the last sentence of the second paragraph of subsection (a); and substituted "purposes" for "purposes. This exemption does not apply to any equipment or devices used to administer, release, apply, or otherwise dispense these substances" in the introductory paragraph of subdivision (a)(6); and inserted "dollars" in sub-subdivision (b)(3)a. Session Laws 2020-6, s. 1(a) rewrote subdivision (a)(7). For effective date and applicability, see editor's note.