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purchaser of a taxable item. The tax must be stated and charged separately on the invoices or other documents of

the retailer given to the purchaser at the time of the sale except for either of the following: (1) Vending machine

sales; (2) Where a retailer displays a statement indicating the sales price includes the tax.

Items Given Away by Merchants

G.S. 105-164.12C is added to clarify that if a retailer engaged in the business of selling prepared food and drink for

immediate or on-premises consumption also gives prepared food or drink to its patrons or employees free of

charge, the property given away is considered sold along with the property sold. If a retailer gives an item of

inventory to a customer free of charge on the condition that the customer purchase similar or related property, the

item given away is considered sold along with the item sold. In all other cases, property given away or used by any

retailer or wholesale merchant is not considered sold, whether or not the retailer or wholesale merchant recovers its

cost of the property from sales of other property. This clarifying change was enacted with a retroactive date of

August 7, 2009. It was at that time that statutory language pertaining to items given away by merchants was

inadvertently removed from existing statutes with the intent to relocate it to another section within the sales and use

tax law. Due to an oversight, this language was not added to a different section; however, there was no intent to

remove the statutory language in its entirety.

Installation Charges

G.S. 105-164.13(49) is amended to clarify that installation charges are not subject to tax, when the charges are

separately stated on an invoice or similar billing document given to the purchaser at the time of the sale.

Delivery Charges for Direct Mail

G.S. 105-164.13(49a) is amended to clarify that delivery charges for direct mail are not subject to tax if the charges

are separately stated on an invoice or similar billing document given to the purchaser at the time of sale.

Refunds-Interstate Carriers

G.S. 105-164.14(a) is amended to clarify that, for airplanes operated both inside and outside of this State during a

refund period, airplane miles are not considered in this State if the airplane does not depart or land in this State.

Additionally, the numerator of the mileage ratio is the number of miles the applicant operated all motor vehicles,

railroad cars, locomotives, and airplanes in this State during the refund period. The denominator of the mileage

ratio is the number of miles the applicant operated all motor vehicles, railroad cars, locomotives, and airplanes both

inside and outside this State during the refund period.

Effective July 1, 2013

Service Charge for Prepaid Wireless Telecommunications Service

Effective July 1, 2013, a 911 service charge is imposed on each retail purchase of prepaid wireless

telecommunications service occurring in this State. Sellers of prepaid wireless telecommunications service shall

collect the 911 service charge for prepaid wireless telecommunications service from the consumer on each retail

transaction occurring in this State. The 911 service charge for prepaid wireless telecommunications service is in

addition to the sales tax imposed on the sale or recharge of prepaid telephone calling service under G.S. 105-

164.4(4d). Sellers may deduct and retain from the 911 service charges it collects from consumers and remits to

the Department of Revenue an administrative allowance of five percent (5%). More information will be available on

the Department’s website regarding this imposition on or before April 1, 2013.

PART III: STREAMLINED SALES AND USE TAX

Food and Food Ingredients Definitions

Pursuant to G.S. 105-164.13B, “food” is exempt from State sales and use tax and subject to the 2% local sales and

use tax rate. “Candy” is specifically excluded from the exemption under G.S. 105-164.13B(a)(7) for food and is

subject to the general State and applicable local sales and use tax rate. Candy is defined as “a preparation of sugar,

honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or

flavorings in the form of bars, drops, or pieces that do not require refrigeration. The term does not include any

preparation that contains flour.” The guidance issued by the Streamlined Sales Tax Governing Board by the adoption

of Rule 327.8 defines, in greater detail, the terms preparation, bars, drops or pieces, flour, other ingredients or

flavorings, sweeteners, and refrigeration. The rule also advises the candy definition is not intended to be applied to

every type of food product sold, as many products, such as meat products, breakfast cereals, potato chips, and

canned fruits and vegetables, are not commonly thought of as “candy.” Additional information regarding the adopted

rule will be available on the Department’s website.

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Instructions For Form E-505 - Tax Law Changes - North Carolina Department Of Revenue - 2012 Page 3

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