AN ACT to exempt certain prepared foods from the state sales tax.

The General Assembly of North Carolina enacts:

SECTION 1.(a)  G.S. 105‑164.4L reads as rewritten:

§ 105‑164.4L.  Prepared food.

(a)        Prepared Food Definition. – The term prepared food means food that meets at least one of the following conditions:

(1)        It is sold in a heated state, or it is heated by the retailer.

(2)        It consists of two or more foods mixed or combined by the retailer for sale as a single item. This does not include:

a.         Food containing raw eggs, fish, meat, or poultry that requires cooking by the consumer as recommended by the Food and Drug Administration in chapter 3, part 401.11 of its Food Code so as to prevent foodborne illnesses.

b.         Food that is only sliced, repackaged, or pasteurized by the retailer.

c.         Food sold without eating utensils by a retailer whose primary business is food manufacturing as classified in NAICS Sector 311, provided the food is sold in a sealed, shelf‑stable container that includes a Nutrition Facts panel as required by the federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301, et seq.

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SECTION 1.(b)  G.S. 105‑164.13B reads as rewritten:

§ 105‑164.13B.  Food exempt from tax.

(a)        State Exemption. – Food is exempt from the taxes imposed by this Article unless the food is included in one of the subdivisions in this subsection. The following food items are subject to tax:

(1)        Repealed by Session Laws 2005‑276, s. 33.10, effective October 1, 2005.

(2)        Dietary supplements.

(3)        Food sold through a vending machine.

(4)        Prepared food, other than (i) bakery items sold without eating utensils by an artisan bakery. bakery and (ii) food excluded from the definition of prepared food under G.S. 105‑164.4L(a)(2)c. The term bakery item includes bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas. An artisan bakery is a bakery that meets all of the following requirements:

a.         It derives over eighty percent (80%) of its gross receipts from bakery items.

b.         Its annual gross receipts, combined with the gross receipts of all related persons, do not exceed one million eight hundred thousand dollars ($1,800,000). For purposes of this subdivision, the term related person means a person described in one of the relationships set forth in section 267(b) or 707(b) of the Code.

(5)        Soft drinks.

(6)        Repealed by Session Laws 2003‑284, s. 45.6B, effective January 1, 2004.

(7)        Candy.

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SECTION 2.  This act becomes effective October 1, 2026, and applies to sales made on or after that date.