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Update on N.C.G.S. 66-255

The good news is that we were heard (at least partially). The North Carolina Department of Revenue (NCDOR) has decided that farmers that are exempt from paying sales tax don’t have to register and file reports or post the certificate under N.C.G.S. 66-255. While it is a minor victory for farmers in that they do not now have to fill out a little more paper work, the recent decision by NCDOR may actually make it harder for market managers. Market managers are now not only required to make sure that non-exempt vendors obtain and display the certificate, they must now also determine if a farmer is exempt from paying sales tax.

N.C.G.S. 66-255 as written required all vendors, even farmers exempt from paying sales tax, “to exhibit a valid certificate of registration for visual inspection… and must require each vendor to keep the certificate of registration conspicuously and prominently displayed….” The NCDOR, in a ruling issued yesterday, has now determined that: “A farmer that only sells farm products produced by the farmer is not required to obtain a Certificate of Registration.  A farmer that purchases products for resale that are not produced by the farmer in the capacity of a producer is required to obtain a Certificate of Registration.” So farmers who are exempt from paying sales tax are also now exempt from being required to obtain and display a Certificate of Registration.

The catch is that exempt farmers must now “provide a written statement attesting that the items were produced by the farmer and provide the agricultural exemption number issued to the farmer by the Department (of Revenue)…” to the farmers market manager. The ruling goes on to say that “the certified statement and the agricultural exemption number obtained from the farmer” by the farmers market manager “is required to be kept in conjunction with the daily registration list” and be kept “for no less than two years and must at any time be made available upon request to any duly authorized agent of the Department of Revenue.”

What this means is that the farmers market manager (most being unpaid volunteers), who already under the statute had to keep a registration list of all vendors (with their names and certificate numbers), are now required to have all exempt farmers provide them with a written attestment of their tax exempt status as well as document the farmer’s exemption number. Market managers just had their burden doubled by requiring separate and different rules for the vendors selling at the market. Now, a farmers market vendor that sells baked goods or jams, for example, must file for and obtain their certificate from the NCDOR and prominently display it. Exempt farmers must obtain an exemption number from the NCDOR and file a written attestment with the market manager and provide the manager with their exemption number. With this ruling the  market manager must now not only require that all vendors have their certificates, they must also make sure exempt farmers have an exemption number. They must also keep a daily list of both for no less than two years or be charged with a misdemeanor.

Farmers markets in North Carolina need all the help they can get in providing farmers and small business owners with access to markets. What they don’t need is increased paperwork and threats of legal action if volunteer market managers don’t enforce revenue laws. It is perfectly reasonable for the North Carolina Legislature and the NCDOR to require vendors selling taxable products to conform to law and pay their taxes. It is an unreasonable burden to require unpaid volunteer market managers to enforce those laws.

Charlie Jackson, Executive Director