Electricity Sales and Use Tax
Gross receipts derived from the sales of electricity are generally subject to the 7.00% combined general rate of tax. For gross receipts derived from sales of electricity by Cape Hatteras Electric Membership Corporation billed on or after July 1, 2014, and before July 1, 2015, N.C. Gen. Stat. § 105-164.4(a)(14a) imposes a privilege tax at a rate of three and one-half percent (3.50%). For additional information, refer to Important Notice: Rate Change for Gross Receipts Derived from Sales of Electricity, Important Notice: Sales Tax Rate Phased in for Sales of Electricity by Cape Hatteras Electric Membership Corporation, and Section 39 of the Sales and Use Tax Technical Bulletins. Note: The information in the technical bulletin has not been updated for the rate changes applicable to gross receipts derived from sales of electricity.
Effective July 1, 2014, N.C. Gen. Stat. § 105-164.13E(a)(1) provides an exemption from sales and use tax for electricity sold to a qualifying farmer that is measured by a separate meter or another separate device and is used by the qualifying farmer for farming operations, which does not include preparing food, heating dwellings, and other household purposes. Effective July 1, 2014, a qualifying farmer is a farmer who has an annual gross income for the preceding income tax year of ten thousand dollars ($10,000) or more from farming operations or who has an average annual gross income for the three preceding income tax years of ten thousand dollars ($10,000) or more from farming operations and includes a dairy operator, a poultry farmer, an egg producer, a livestock farmer, a farmer of crops, and a farmer of an aquatic species, as defined in N.C. Gen. Stat. § 106-758. A conditional farmer is not a qualifying farmer, but is allowed to purchase electricity exempt from sales and use tax to the same extent as a qualifying farmer.
N.C. Gen. Stat. § 105-164.13(57) provides the sale at retail and the use, storage, or consumption in this State of electricity sold to a manufacturer for use in connection with the operation of a manufacturing facility is exempt from sales and use tax. The exemption does not apply to electricity used at a facility at which the primary activity is not manufacturing. For purposes of the exemption, a "facility" is a single building or structure, or a group of buildings or structures that are located on a single parcel of land or on contiguous parcels of land under common ownership and any other related real property contained on the parcel or parcels. The exemption applies to electricity used both inside and outside of the facility, including electricity used for parking lot lighting at the facility.
Gross receipts derived from sales of electricity and the 7.00% combined general rate of sales and use tax is to be reported to the Department on Form E-500E, Utility and Liquor Sales and Use Tax Return. Cape Hatteras Electric Membership Corporation should use the applicable worksheet available on the website to assist in converting the tax due at 3.50% to 7.00% for reporting purposes only to the Department. Information about the filing frequency and due date requirements can be found in Filing Frequency and Due Dates.