North Carolina offers sales and use tax exemptions for manufacturing machinery and equipment; electricity, fuel and natural gas for manufacturing facilities, raw material for manufacturing, and inventories.

Machinery and Equipment, Sales and Use Tax Exemption 

Mill (generally manufacturing) machinery, including parts or accessories as well as specialized equipment for loading or processing, is exempt from sales and use tax. For a list of items that are classified as mill machinery, please see  Section 58 of the North Carolina Department of Revenue’s Sales and Use Tax Technical Bulletin. 

North Carolina does not levy a sales and use tax on repairs to industrial machinery or service contracts for mill machinery. 


Electricity, Fuel and Natural Gas, Sales and Use Tax Exemption 

Retail sales, as well as the use, storage or consumption of electricity, fuel and piped natural gas sold to a manufacturer are exempt from sales and use tax for use in a manufacturing operation. This 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 (1) a single building or (2) a group of buildings that are located on a single parcel of land or on contiguous parcels of land under common ownership. “Facility” also refers to any other related real property contained on the parcel(s) where manufacturing activity occurs. 


Raw Materials, Sales and Use Tax Exemption 

Purchases of ingredients or component parts of a manufactured product that become an ingredient or component part of tangible personal property are exempt from sales and use tax. In addition, packaging items that constitute a part of the sale (retail or wholesale) and are delivered with the product to the customer are exempt from sales and use tax. 


Inventory, Property Tax Exclusion 

North Carolina and its local governments do not levy a property tax on inventories. 

Inventories owned by contractors, manufacturers and merchants (retail and wholesale) are excluded from property tax.  Inventories are defined as goods held for sale in the regular course of business by manufacturers, retail and wholesale merchants and construction contractors. For manufacturers, the term inventory includes raw materials, goods in process and finished goods, as well as other materials or supplies that are consumed in manufacturing or processing. Inventory also refers to any commodity or part thereof that accompanies and becomes part of the property being sold. 

For a full list of items that are exempt from the sales and use tax, please see North Carolina General Statute 105-164.13.  


The Economic Development Partnership of North Carolina does not award or administer this incentive. All economic development incentives are awarded and administered by the North Carolina Department of Commerce. 

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Lena Hobbs-Brown

Lena Hobbs-Brown

Business Development Associate