Important Notice – Disaster Assistance Payments
The Federal Emergency Management Agency (FEMA) and the American Red Cross are providing disaster assistance to individuals in the Gulf Coast area affected by Hurricane Katrina. Financial assistance may be in the form of a direct deposit to an individual’s bank account, a check mailed to an individual, or debit or client assistance card issued to the individual. The debit or client assistance card is “loaded” with a specific amount of money and may be used to purchase goods and services or to make cash withdrawals.
While direct sales to the federal government or federal agencies are not subject to sales or use tax, the North Carolina Department of Revenue has determined that purchases made by individuals using debit cards issued by FEMA or the Red Cross and purchases made with funds provided by these organizations do not constitute direct purchases by federal agencies. Therefore, unless otherwise exempt, purchases of taxable tangible personal property and taxable services by disaster victims or evacuees are subject to the applicable State and local rates of sales or use tax.
Effective August 1, 2008, per S.L. 08-107, G.S. 105-164.13(58) provides that tangible personal property purchased with a client assistance debit card issued for disaster assistance relief by a State agency or federal agency or instrumentality is exempt from sales and use tax. For purposes of this exemption, purchases made with client assistance debit cards issued by the Federal Emergency Management Administration (FEMA) or the American Red Cross on or after August 1, 2008 are exempt from sales and use tax.
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