Material & Disbursement Services (MSD)
POLICY 49
Effective Date: 07/01/1996
Last Modified Date: 11/19/2003
General
Unless an item qualifies for a special tax rate, all purchases made by the University for supplies and materials are taxed at a rate of 7%. Departments should add in the tax cost on the Purchase Requisition to reflect the correct total of the requested supply or material item. Purchases made from out-of-state vendors are taxed at the North Carolina rate. Most purchases for services are tax-exempt; however, supplies that are acquired with the services are subject to tax. If a department requests both services and supplies on a single requisition, multiple line items separating the services and supplies are required.
State Sales Tax
Other than for those categories of items exempt by law, all purchases of supplies and materials are subject to the inclusion of a sales tax rate as part of the total cost of the order.
State Sales Tax Contract/Grant Funds
Purchases for supplies and equipment in support of a contract or grant are taxed at the time of purchase at the current state tax rate; however, the contract or grant account is immediately and automatically credited for the amount of the tax by the FRS system.
Original Cost
When items are traded in as a condition of the purchase, the state sales tax is calculated as a percentage of the original cost at the time of purchase.
Exemption from Federal Excise Tax
The University of North Carolina, being an agency of the State of North Carolina, is exempt from the Federal Excise Tax. Generally, orders or contracts signed by an authorized agent of the University are accepted by vendors in support of this exemption for items subject to the Federal Excise Tax.
Sales Tax Exemptions
- Items purchased for resale by the University are exempted at the point of purchase. The sales tax is collected and paid at the point of sale. Purchase Requisitions covering such items must bear the notation, "Tax Exempt - Purchase for Resale." Vendors whose major sales are to a University agency or department that is exempt from the tax must have on file an Exemption Certificate. When appropriate, Purchasing Services will furnish the vendors with the Exemption Certificates.
- Purchases of seed and fertilizers.
- Purchases of most services.
- Services (labor) charge for repair to equipment when labor can be identified as a separate line item.
- Repairs and alterations, such as painting, masonry work, electrical work, and plumbing where the order is for the vendor to furnish both labor and material. The vendor pays the tax on the materials that are used and includes the tax in the total cost. If the University buys the materials for a repair vendor to use, then the material purchase is subject to tax.
- Rental of real property.
- Certain orthopedic products designed to be implanted in the body or prescribed by a physician to be worn on the body.
- Laundry service where the vendor provides the linen as part of the service is taxable. If the vendor is cleaning University laundry, then the service is not taxable.
- Shipping charges for items shipped to a North Carolina location are taxed. Shipping charges for items shipped to any location outside the State of North Carolina are not taxed.
Items Taxable at Special Rates
Highway motor vehicles are taxed at a 3% rate with a maximum tax of $1,000.00 per vehicle.
Supplies or equipment used in commercial broadcasting (both radio and television) is taxed at a 1% rate with a maximum tax of $80.00 per item.
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