Sales Tax: Exemptions for Farm Product Sales

Sales Taxes are reportable on the sale of many goods and services. Such taxes also become an expense when purchasing inputs for business and personal use. In North Carolina, agricultural products and the purchase of inputs enjoy various exemptions. However, such exemptions have their limit, and it is important to understand when a particular product fails to meet the exemption. Likewise - regarding exemption from sales tax on inputs - North Carolina producers need to be aware of income maintenance requirements for the exemption.

For farm operations, most products sold from the farmer direct-to-buyer are exempt from sales taxes, in that the customer neither pays the tax nor the farm operator is required to remit the tax. However, a change in the nature of the farm product sold and where it is sold in combination with other products may trigger a sales tax requirement. Also, if the farmer loses their status as producer of the item sold and is considered a retailer of the item, exemptions are lost. This short paper seeks to clarify the line of when a farmer must remit sales tax for products sold, as well as the responsibilities of farmers and specialty markets.