Published: June 10, 2024

NC Mill Machinery Ruling: Supreme Court Upholds Tax Exemption

NC Mill Machinery Ruling Showing An Asphalt Mill

Supreme Court of North Carolina Upholds Business Court Decision

On May 3, 2024, the Supreme Court of North Carolina unanimously upheld a business court decision regarding the NC Mill Machinery Ruling, which involves the state’s exemption for mill machinery used in manufacturing.

Business Court’s Initial Ruling

The ruling, issued on January 3, 2023, by the business court, found that the North Carolina Department of Revenue (“Department”) had incorrectly assessed sales tax at the full rate on machinery purchases for asphalt production.

Details Of The Dispute In The NC Mill Machinery Ruling

The respondent, a manufacturing and construction company, used the majority of the asphalt it produced for its own construction activities. They then sold the remaining asphalt to other parties. The Department contended that the company should be classified as a construction contractor, not a manufacturer. This was due to its primary activity being construction. As a result, the company would not qualify for the mill machinery exemption.

Business Court’s Reasoning

The business court disagreed with the Department’s argument. Ruling that the Department’s use of a primary/majority usage threshold was invalid. The court noted that no such test exists in the statute, nor does the statute define manufacturing. Therefore, both the court and the Department lacked the authority to apply their own interpretations. This meant they should instead adopt a broad reading that reflects the generality of the statutory language.

Implications Of The Supreme Court Decision

This interpretation of North Carolina’s mill machinery exemption suggests that potential refunds could be available for relevant purchases used to produce products for sale, even if most of the product produced is used internally.

Assistance with Navigating NC Mill Machinery Ruling

Let Clarus Partners help you navigate the NC mill machinery ruling and any related departmental challenges. With our extensive experience in tax advisory and compliance, we are well-equipped to assist your business in understanding the implications of this ruling.

We offer tailored solutions to ensure you maximize potential tax refunds and remain compliant with state regulations. Contact us today to learn how we can support your business and help you make the most of the NC mill machinery ruling. Our team of experts is ready to guide you through the complexities of tax exemptions and departmental procedures.