NCDOR Communication

Contact: Thomas Beam, External Communications
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July 10, 2009

Understanding Sales Taxes On Agricultural Products

Sales taxes on sales of agricultural products are complex. With the definitions of food and prepared food, the original state of a product and the difference between wholesale and retail sales, it is very easy to misunderstand how sales tax applies to sales of agricultural products.

This quick reference guide is designed to help farmers, merchants and other retailers understand the sales tax obligations for specific kinds of sales of agricultural products. The types of sales are listed with their tax obligations, followed in some instances by the applicable tax law.

Note: the general state sales tax rate and applicable local sales tax is mentioned throughout this quick reference guide. That rate is subject to change and varies from county to county. Click here to find out about the rate in your county.

Note 2: this document refers to producers of farm products and retail merchants. This difference often means the difference in how sales are taxed. Click here and look at subsection E for more information on producers and retailers.

Meat

Includes chicken, beef, lamb, veal, turkey, pork, rabbit

  • Live animals: exempt from tax when sold by the producer. [G.S 105-164.13(4b)].
  • Cuts of meat (uncooked): subject to the 2 percent rate on food when sold by a producer or retail merchant.
  • Processed meat (example, uncooked sausage patty): subject to the 2 percent rate on food when sold by a producer or retail merchant.
  • Cooked/smoked meat: subject to general state rate and applicable local sales tax when cooked or smoked by a producer or retail merchant.

Fish/Seafood

  • Fish “off the boat:” exempt from tax when sold by producer [G.S 105-164.13(7)].

Farm-Raised Fish

  • Live: exempt from tax when sold by producer [G.S 105-164.13(4b)].
  • Whole on ice or frozen (uncooked): exempt from tax when sold by producer [G.S 105-164.13(4b)] or subject to the 2 percent rate on food when sold by a retail merchant.
  • Processed (uncooked): subject to the 2 percent rate on food when sold by a producer or retail merchant.

Crawfish

  • Live: exempt from tax when sold by producer [G.S 105-164.13(4b)].
  • Cooked: subject to general state rate and applicable local sales tax when cooked or smoked by a producer or retail merchant.

Shrimp/Prawns/Crab/Lobster

  • Live: exempt from tax when sold by producer [G.S 105-164.13(7)] or subject to 2 percent rate on food when sold by retail merchant.
  • Fresh from the boat: exempt from tax when sold by producer [G.S 105-164.13(7)] or subject to 2 percent rate on food when sold by a retail merchant.
  • Frozen (uncooked): exempt from tax when sold by producer [G.S 105-164.13(7)] or subject to 2 percent rate on food when sold by a retail merchant.
  • Cooked: subject to general state rate and applicable local sales tax when cooked or smoked by a producer or retail merchant.

Farm Raised Clams/Oysters

  • Live or Fresh (uncooked): exempt from tax when sold by producer [G.S 105-164.13(4b)] or subject to 2 percent rate on food when sold by retail merchant.

Fruits/Vegetables

Raw vegetables sold by a producer are exempt [G.S. 105-164.13(4b)]. Raw vegetables (including mixed vegetables) that are cut up and placed in bags to be sold are also exempt. If the producer adds anything to the vegetables such as seasoning, the vegetables are no longer exempt and are subject to the 2 percent rate on food. Raw vegetables in any scenario as described above sold by a retail merchant are taxable at the 2 percent rate on food.