All the southeastern states, except North Carolina, exempt electricity and natural gas used in manufacturing from the sales tax. For North Carolina to be competitive, this tax rate should be reduced to one percent. Larger companies and some company divisions often operate under a system called contention manufacturing. Under this system, divisions of the same company compete against other divisions and plants within the company for the right to manufacture a given product. Decisions are based on cost, quality, and other criteria.
Competition is often very close.
If the cost for purchasing equipment to manufacture the product or the cost of utilities are higher for a plant in North Carolina because of these taxes, this fact may tip the scale against the product s being manufactured in our state. Furthermore, a tax on machinery to manufacture goods that ultimately will be sold at retail contradicts the notion of a tax aimed only at retail sales themselves. From an economic standpoint, taxing the tools or utilities of production will only serve to decrease the level of economic activity and growth in North Carolina, and will decrease the level of revenues to the State in the long run.