Amends GS 159-34 (pertaining to annual independent audits under the Local Government Budget and Fiscal Control Act [Act]) to enact four new subsections GS 159-34(e)-(h), effective January 1, 2024, to apply for audits for fiscal years ending on or after June 30, 2023. Requires the Secretary of the Local Government Commission (Secretary) to send a notice of noncompliance to counties or municipalities who did not comply with the Act’s audit requirements within 30 days following nine months after the county or municipality’s fiscal year’s end. Details notice content. Specifies that a county or municipality that fails to comply with the notice of noncompliance and to complete the annual required audit within 12 months of its fiscal year end is deemed to have given consent to the withholding of a portion of its sales tax distributions. Limits the total cumulative amount that may be withheld to an amount equal to 150% of the cost of the required annual audit as indicated in the audit contract between the county or municipality and its external auditor for the audit report, if such a contract has been executed, or 150% of the actual fee for the most recently filed audit report if a contract has not been executed for the current year audit.

Requires the Secretary of Revenue to withhold from the county or municipality's distribution under GS 105-486 (first 1/2 cent of local government sales and use taxes), and from the county or municipality's distribution under GS 105-501 (additional sales and use tax distributions) if necessary, the amount required to be withheld upon written notification to do so from the Secretary. Requires the notifications to be made on a quarterly basis and to include the total amount to be withheld. Specifies the amount to be withheld is 5% of one-twelfth of the county or municipality's annual general fund budget as it was adopted at the beginning of the fiscal year in which the withholding begins until the total cumulative withholding amount is reached. Requires the Secretary of Revenue to begin withholding from the county or municipality's first distribution of sales and use tax that is at least 45 days after they receive notification from the Secretary.

Provides for an appeal process by a county or municipality upon receipt of a notice of noncompliance. Authorizes the Local Government Commission (Commission) to establish guidelines for a successful appeal. Requires the Commission to delay withholding of any sales tax if the county or municipality appeals the notice before withholding occurs. If the county or municipality appeals after the Secretary takes action to withhold sales tax, the Secretary must notify the Secretary of Revenue to release any funds withheld if the Commission determines that the county or municipality has provided sufficient evidence that the failure to provide a copy of their annual audit report is due to circumstances within the guidelines established by the Commission. If a locality is in compliance or their appeal is successful, requires that the Secretary notify the Secretary of Revenue to release the funds with 30 days of the determination of compliance or after the completion of appeal. Requires the Department of Revenue to release the funds within 45 days of the earlier of the following (1) two years from the date of notification that the funds be withheld or (2) the date the Secretary of Revenue received notification that the locality was in compliance or the appeal was successful. 

Requires the Commission to establish and make available the guidelines specified above. Permits the Commission to release the guidelines before January 1, 2024, but specifies that the guidelines do not take effect until then.