by Sarah Curry
Director of Fiscal Policy Studies
Every year citizens pay sales and use tax when purchasing items in North Carolina. Businesses are no different. Nonprofits however receive a refund for a portion of their local and state sales taxes paid on tangible property and certain services used in conducting their nonprofit operation.
In 2008, the statute was rewritten to clarify the types of qualifying nonprofits for this refund. The statute mentions volunteer fire departments, EMS squads, nonprofit hospitals and qualified retirement homes. The largest of these being hospitals, the law also allows nonprofit hospitals that are ineligible for a refund are allowed a refund of sales taxes paid on its nonprescription drugs used in its operations. (§ 105-164.14(b))
North Carolina’s sales tax refunds data to nonprofits is from the Statistical Abstract of North Carolina Taxes prepared by the NC Department of Revenue. Hospitals are the largest group of claimants for the refund and also take the largest amount. In FY 2011-12 hospitals were refunded almost $205 million and make up over 80% of the total refunds issued.