North Carolina was nicknamed the "Tar and Turpentine State" because of this industry. Somehow, these terms evolved until the nickname Tar Heel was used to refer to residents of North Carolina and gained prominence during the American Civil War.
A story that must be considered folklore states that when Lord Cornwallis' troops forded the Tar River in early May of 1781 en route to Yorktown, they emerged with tar on their feet. This marked their passage through North Carolina as "tar heels."
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