GAP 200.230, Sales and Use Tax

I.    Overview

II.   Sales Tax

III.  Use Tax on Purchases Made

IV.  Sales Tax in Other States while Traveling

V.   Reporting Requirements

VI.  Resources

 

 

I. Overview

A. State Sales Tax

All retail sales of tangible personal property, meals and tickets/admission to entertainment events are subject to state and local sales tax, unless specifically exempted by statute. The party collecting the tax uses the term sales tax.

B. State Use Tax

All purchases "consumed" in the operation of an organization are subject to state and local use tax, unless specifically exempted by statute. The party paying the tax uses the term use tax. The terms sales and use tax are frequently used interchangeably on purchases for operational needs, causing confusion at times.

C. Direct Pay Permit

Duke holds a direct pay permit, issued by the State of North Carolina, one for the University (#209) and one for the Health System (#468). When a copy of this permit is given to a vendor, they should not charge sales tax. The permit allows Duke to submit directly to the state any use tax due on purchases.

Copies of the direct pay permits may be obtained by selecting the links, above, or by contacting the Corporate Tax Department. North Carolina Statute does not permit the invoking of the direct pay permit for purchases from hotels, restaurants, and food caterers.

D. Certificate of Resale

A Certificate of Resale (Form E-590) is used when a business, engaged in retail sales, purchases items to be sold. This certificate exempts the purchases from sales tax. Most departments normally should not expect a vendor to request form E-590, the exception being a gift shop, or other entity, which routinely sells retail merchandise.

E. "Tax Exempt"

Duke University (Duke) and Duke University Health System's (DUHS) status of "tax exempt" is an IRS status, not the state of North Carolina. The state of North Carolina requires that Duke and DUHS collect sales tax on all non-exempted revenue.

Both organizations, Duke and DUHS, are also required to pay sales or use tax on purchases. Duke and DUHS have been issued direct pay permits, which allows for the self-assessment of use tax rather than paying sales tax to vendors, with the exception of purchases from hotels, restaurants, and food caterers.

Duke University and DUHS qualify as nonprofit organizations, and therefore are entitled to a semiannual refund of sales/use tax paid in North Carolina on the purchase of tangible personal property used in carrying on nonprofit work.

F. Sales Tax on Purchases of Alcohol

North Carolina sales tax paid on the purchase of alcoholic beverages is not refundable to tax exempt entities. This is a legislative change that became effective with purchases from July 1, 2006 forward. This includes all alcohol, whether purchased in restaurants, through caterers or through grocery or package stores.

 

II. Sales Tax

A. Collecting Sales Tax

North Carolina Statute 105-164.4 requires Duke University and Duke University Health System to collect sales taxes on all sales of tangible personal property, meals and tickets/admission to entertainment events.

Some examples of these types of sales include the following:

• Sales of food and drinks to students, faculty, staff and visitors/guests
• Sales of textbooks and other publications
• Sales of Duke mementos, including clothing
• Sales of surplus property
• Sales of miscellaneous items (cookbooks, pictures, etc.)
• Rental of equipment to non-Duke groups
• Merchandise/goods sold through auction (live or silent)
• Sales of tickets or admission to entertainment events (see Section II, B below)

A few items are exempt from the collecting of sales tax; these exemptions include:

• Gift certificates
• Prescription drugs
• Prescription glasses

B. Sales of Tickets/Admission to Entertainment Events

1. Effective January 1, 2014, admission to entertainment activities will be subject to state and local sales tax.  Examples of these events include:
   • Sporting events;
   • Live performances of any kind;
   • Motion pictures or films;
   • Museum, cultural site, garden, exhibit, show, or guided tour;
   • Fundraising events;
   • Lectures (if sold to the public).  If the lecture is open to students only, the event is considered educational and is not subject to sales tax.
   • Meals sold by ticket
2. Amenities, such as parking, included in the ticket/admission price are not subject to sales tax.
3. Sales tax must either be shown separately on the ticket or receipt.  If the sales tax is included in the total ticket price, a statement must be included on the ticket or receipt such as “Sales tax included in ticket price.”
4. Handling fees or convenience fees are also subject to sales tax.
5. SPECIAL RULE FOR 2014 EVENTS:
   If the initial sale of tickets for an event to be held in 2014 began before January 1, 2014 and at least one ticket was sold in 2013 for the event, sales tax should NOT be collected on either the sales that take place in 2013 or 2014. 

C. Out of State Sales

1. North Carolina sales tax should not be charged on any Duke sales made to customers who take delivery outside the State of North Carolina.
2. If a department sells items while physically present in another state (example: selling continuing education material at a medical convention), the department should contact the Corporate Tax Department prior to the event to determine whether the sales will be subject to sales tax. If a sales tax liability is incurred, departments should work with Corporate Tax to ensure that all accounting and reporting requirements are met.

D. Accounting for tax collected

1. Retail sales/tangible personal property/merchandise, subject to North Carolina sales taxes, should be recorded to G/L account 346400, Sales - Merchandise Subject to NC Sales Tax. The total amount collected, including the sales tax collected, is coded to this G/L account. The Corporate Tax Department will calculate and remit the amount of tax due to the state. If a different G/L account is used, notify Corporate Tax.
2. Sales of Tickets/Admission on Meals and Entertainment Events, subject to North Carolina sales taxes, should be recorded to G/L account 347000, Sales – Tickets/Admissions Charges.  The amount collected, less the sales tax, is coded to this G/L account.  The sales tax collected should be coded to G/L account 208001, Sales Tax Accrued – Tickets/Admissions.  The Corporate Tax Department will remit the tax to the state.
   1. Use the following formula to determine sales tax from gross sales:
         Gross sales (including sales tax)/1.075 = Net Sales
         Net Sales x .075 = Sales Tax
3. Tax collected on sales outside of home county: notify Corporate Tax when retail sales in North Carolina resulting in a sales tax charge take place outside of a home county. The home counties are as follows:
   • Durham County for Duke University and Duke University Health System
   • Wake County for Duke Raleigh Hospital and Duke HomeCare and Hospice
   • Carteret County for the Marine Lab
   • For sales of tickets/admission to entertainment events, the county the event is held in is considered the county for which sales tax should be collected and the applicable county tax rate applies.  Notify Corporate Tax when sales of tickets are for an event outside of the home county.  Corporate Tax can also assist in determining the correct county tax rate.
     
     When filing the required sales tax forms, Corporate Tax must give credit for the sales tax paid to the North Carolina County where the sales tax was actually collected.
4. Retail Sales, exempt from sales tax, should be recorded to G/L account 346600, Sales - Merchandise Exempt from NC Sales Tax. Notify Corporate Tax of the type of retail sales being recorded under G/L account 346600 for information purposes only.

 

III. Use Tax on Purchases Made

A. Purchases authorized by Duke University/Duke University Health System

1. A Duke Purchase Order directs the vendor to the Procurement Webpage for relevant sales or use tax information. Vendors (excluding hotels, restaurants, and food caterers) should not assess sales tax on any Duke purchase. Duke self-assesses and remits to the state any use tax due.
2. Departments making purchases without a Purchase Order should provide vendors (excluding hotels, restaurants, and food caterers) a copy of the direct pay permit. The permit relieves vendors of the obligation to collect sales taxes at the point of sale. Duke self-assesses and remits to the state any use tax due.
   
   Invoices/Accounts Payable Check Requests processed by departments should normally exclude any North Carolina sales tax charge (except the sales tax on purchases of alcohol). If the vendor's invoice includes a sales/use tax charge (as would be the case for hotels, restaurants and caterers), the department can authorize payment coding the sales tax charge, excluding the sales tax charged on alcohol, to fund 100-1000 using G/L account 146000, Sales Tax Receivable. Occupancy tax charged by a hotel is not sales tax; the expense is charged to the department. As sales tax on the purchase of alcohol is no longer refundable, please request the vendor issue a separate invoice for the sale of alcoholic beverages.
   
   Petty Cash is a cash purchase made using Duke cash; therefore, the above rules for invoices apply. The petty cash reimbursement request should be completed by coding any North Carolina sales tax paid, excluding the sales tax charged on alcohol, to fund 1001000 using G/L account 146000, Sales Tax Receivable.

B. Purchases authorized by individuals

1. Duke Corporate Card Purchases:
   The corporate card cites the direct pay permit number that exempts the purchase from sales tax at point of sale. However, North Carolina no longer exempts, at the point of sale, purchases involving prepared food and beverage sales as well as motel, hotel, or other accommodation rentals. Vendors should charge sales tax on these items.
   
   Duke can claim a refund for all sales/use taxes paid in North Carolina on corporate card purchases, except purchases of alcohol. As sales tax on the purchase of alcohol is no longer refundable, please request the vendor issue a separate invoice for the sale of alcoholic beverages. The departmental administrator must ensure that all sales/use tax paid is properly coded, to ensure that a refund can be requested. If the tax amount is not properly coded, the department will absorb the cost of the tax paid. Occupancy tax charged by a hotel is not sales tax; the expense is charged to the department.
   1. Coding any sales/use tax paid:
      1. Any North Carolina sales taxes paid on the corporate card, except sales tax paid on the purchase of alcohol, are coded to the tax receivable code fund 1001000 G/L account 146100 for Duke and DUHS.
      2. Any sales tax paid in a state other than North Carolina on the coroprate card is not to be coded to fund 1001000 G/L account 146100. The department absorbs any tax paid to other states; Duke cannot request a refund from other states. The tax amount should be coded the same as the item or service purchased.
2. Purchases not using a Corporate Card:
   Effective January 1, 2014, Duke may claim a refund for North Carolina sales/use tax paid by an individual using personal cash or credit card.  Beginning January 1, 2014, tax reimbursed to an individual should be coded to G/L account 146000.  
   
   Any sales tax paid in a state other than North Carolina cannot be requested for refund. The department absorbs any tax paid to other states. The tax amount should be coded the same as the item or service purchased.

 

IV. Sales Tax in Other States while Traveling

A. Duke University personnel are exempt from sales tax on purchases made while in these states on a Duke related business trip. Obtain the required sales tax exemption paperwork from Corporate Tax before leaving on the business trip, as these exemptions must be taken from the vendor. We are not eligible to file a refund of sales tax paid to these states.

* Access to these PDFs is reserved for the Duke Community

Florida*	Illinois*
Kansas*	Kentucky*
Massachusetts*	Michigan*
Missouri*	New Jersey*
New York*	Minnesota*
Tennessee*	Texas*
Virginia*	Wisconsin*

B. Duke University Health System personnelare exempt from sales tax on purchases made while in these states on a DUHS related business trip. Obtain the required sales tax exemption paperwork from Corporate Tax before leaving on the business trip.

* Access to these PDFs is reserved for the Duke Community

Tennessee*

Texas*

 

V. Reporting Requirements

1. Duke self-assesses any use taxes due on invoices paid as well as eligible purchases made on the procurement card.
2. Corporate Tax pays any North Carolina sales/use taxes due  by remitting a prepayment by the 20th of the current month and the balance by the 20th of the following month.
3. Any North Carolina sales/use tax paid by Duke (self-assessment amount or paid to vendors, following criteria previously discussed) is booked as a corporate receivable. Semi-annually Duke will claim a refund, of the sales/use tax receivable booked, from the State of North Carolina. Included in the refund claim, Duke identifies the counties where the sales/use tax was paid.

 

VI. Resources

Copies of the direct pay permits for the University and the Health System may be obtained by clicking the links (University #209 and Health System #468) in section C of the Overview, above. For assistance regarding any sales/use tax questions contact:

Corporate Tax
2200 W. Main St., Ste. 300
Durham, NC 27705
(919) 684-0756