HB 884 — Prepared Food Tax — Modification (North Carolina)
Summary
- HB 884 amends G.S. 105‑164.13B to expand the sales‑tax exemption for certain artisan bakeries by raising the annual gross‑receipts threshold that determines eligibility. The bill increases the combined annual gross‑receipts limit (including related persons) from $1,800,000 to $2,400,000. It takes effect October 1, 2025 and applies to sales made on or after that date.
Purpose and intent
- To broaden the population of small, bakery‑focused businesses that qualify as “artisan bakeries” and therefore are exempt from sales tax on eligible bakery items sold without eating utensils. The change is aimed at supporting small bakeries whose revenues exceed the prior threshold but remain relatively modest.
Key provisions
- Amends G.S. 105‑164.13B (Food exempt from tax).
- Retains the existing requirements for an “artisan bakery”:
- At least 80% of gross receipts must come from bakery items, and
- Annual gross receipts (combined with related persons) must not exceed the threshold — increased from $1,800,000 to $2,400,000.
- Clarifies the list of “bakery items” that may be sold tax‑exempt when sold without eating utensils: bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas.
- Confirms that the Secretary administers local sales and use taxes on food as though imposed under the State Article (no change in local administration approach).
Who is affected
- Directly affected: small and mid‑sized bakeries that primarily sell bakery items — particularly those with annual gross receipts between $1.8M and $2.4M (including receipts of related persons) and that derive over 80% of revenue from bakery items. These businesses may newly qualify for the sales‑tax exemption for eligible prepared bakery goods sold without eating utensils.
- Indirectly affected: consumers purchasing from qualifying artisan bakeries (potentially lower final prices), local and State tax administrations (administrative application of the exemption), and State and local tax revenues (see fiscal impact).
Fiscal and policy impacts
- Revenue impact: The bill likely reduces State (and possibly local) sales tax collections modestly by exempting additional bakery sales that were previously taxable. The fiscal note in the available materials does not quantify the revenue change. Net effect depends on how many bakeries cross the new threshold and consumer purchasing patterns.
- Administrative impact: Minimal; Secretary already administers local food tax similarly. Businesses must track receipts and related‑person aggregation for eligibility.
Procedural / timeline
- Amends G.S. 105‑164.13B.
- Effective date: October 1, 2025; applies to sales on or after that date.
- Status (as provided): Passed first reading; referred to finance committee(s) per chamber procedure.
Sponsors
- Primary sponsor listed: Representative Wheatley (with additional sponsors noted in bill text).
