North Carolina Reminder: Tax Exemption for Large Fulfillment Facilities

The North Carolina Department of Revenue wishes taxpayers to take note of a sales and use tax exemption for large fulfillment facilities made effective July 1, 2017, but applicable to sales or purchases made on or after that date. North Carolina provides a sales and use tax exemption for “sales of equipment, or an accessory, an attachment, or a repair part for equipment” that meets all of the following requirements:

• “Is sold to a large fulfillment facility;
• Is used at the facility in the distribution process, which includes receiving, inventorying, sorting, repackaging, or distributing finished retail products;
• Is not electricity”

To be considered a “large fulfillment facility” a facility must meet both of the following conditions:

• “The facility is used primarily for receiving, inventorying, sorting, repackaging, and distributing finished retail products for the purpose of fulfilling customer orders;
• The Secretary of Commerce has certified that an investment of private funds of at least one hundred million dollars ($100,000,000) has been or will be made in real and tangible personal property for the facility within five years after the date on which the first property investment is made and that the facility will achieve an employment level of at least 400 within five years after the date the facility is placed into service and maintain that minimum level of employment throughout its operation.”

The exemption will be forfeited if the level of investment or employment is not timely made, achieved, or maintained. If an exemption is forfeited, the taxpayer becomes liable for all past sales and use taxes avoided resulting from the forfeiture (N.C. Gen. Stat. §105-164.13(5o) and Important Notice: Sales and Use Tax Exemption for Large Fulfillment Facilities, North Carolina Department of Revenue, July 24, 2017).