In Colonial days, North Carolina was a big producer of tar, pitch and turpentine.

During one of the fiercest conflicts of the Civil War, North Carolina troops felt they had been let down by a regiment carrying the colors of another state, and thus carried chips on their shoulders when they pulled back from the front after the battle.

"Any more tar down in the Old North State, boys?" members of the other regiments taunted the battle-weary North Carolinians.

"Not a bit. Jeff Davis bought it all up," retorted the Carolinians.

"How's that, what's he going to do with it?"

"He's gonna put it on your heels to make you stick better in the next fight," answered the soldiers from the land of tar, pitch and turpentine.

Gerneral Lee, hearing of the incident, remarked: "God Bless the Tar Heel Boys."

The nickname stuck.

Source ... Creecy's "Grandfather Tales of North Carolina"