AN ACT TO PHASE-IN THE CONVERSION OF THE LOCAL SALES AND USE TAXES AUTHORIZED UNDER ARTICLES 39, 40, AND 42 TO A STATE SALES AND USE TAX THAT IS ALLOCATED TO THE COUNTIES AND CITIES ON A PER CAPITA BASIS AS A LOCAL REVENUE SOURCE.
Multiple provisions amended in this act are amended more than once with differing effective dates for the changes that are made.
Under current law, Articles 40 and 42 authorize North Carolina counties, which meet the provisions of Articles 40 and 42, to levy and collect sales and use tax in addition to any other state and local sales and use taxes levied under state law. Repeals Articles 40 (First One-Half Cent Local Government Sales and Use Tax) and 42 (Second One-Half Cent Local Government Sales and Use Tax) of GS Chapter 105 (Taxation). Effective January 1, 2016.
Repeals GS 105-164.13B, which provided that food was exempt from the sales and use tax in Article 5 of GS Chapter 105, except for the following food items: (1) dietary supplements; (2) food sold in a vending machine; (3) prepared food, other than bakery items sold without utensils by an artisan bakery; (4) candy; and (5) soft drinks. Amends GS 105-164.4(a), which imposes a privilege tax on a retailer doing business in North Carolina, to increase the general rate of tax from 4.75% to 5.75%, effective January 1, 2016. Again amends GS 105-164.4(a), as amended in this act, to increase the general tax from 5.75% to 6.25%, effective January 1, 2017. Amends GS 105-164.4(a), as amended by this act, to increase the general rate of tax to 6.75% (was, 6.25%), effective January 1, 2018. Adds new subdivision (15) to GS 105-164.4(a), effective January 1, 2016, to provide that the percentage rate of tax on food is 2% with the exception of the food items previously listed in GS 105-164.13B (repealed in this act) as not exempt from the sales and use tax. Deletes soft drinks from the list of food items that are not exempt from the sales and use tax rate in Article 5, GS Chapter 105.
Amends Part 8 of Article 5 of GS Chapter 105, adding a new GS 105-164.44M, Distribution of part of sales tax revenue to counties and cities, effective January 1, 2016. Provides for an annual appropriation from the General Fund to the counties and cities in the amounts necessary to make the distribution under this statute.Declares that the General Assembly finds that the revenue distributed under this section is local revenue and not a state expenditure for the purposes of Section 5(3) of Article II of the North Carolina Constitution. Prohibits the Governor from reducing or withholding the distribution. Sets out the provisions regarding the monthly distribution by the Secretary of part of the taxes imposed by GS 105-164.4 to the counties and cities, including calculating the amount to be distributed and the deduction, for local government services. Provides the amount of taxes imposed by GS 105-164.4 that the Secretary must distribute monthly to the counties and cities is an amount equal to 17.39% of the net proceeds of the sales and use tax imposed at the general rate of tax. Requires the Secretary to allocate the distribution to the counties on a per capita basis and provides criteria regarding the phase-out adjustment factor, including a table specifying counties and the applicable adjustment factor. Also requires the Secretary allocate the revenue from the sales tax on food. Directs the Secretary to determine a per capita figure for use in making distributions among a county and its cities. Requires a county to use 22.5% of the revenue it receives via the distribution of part of the sales tax revenue for public school capital outlay. Allows a county to use part or all of the revenue for any lawful purpose with authorization from the local Government Commission. Provides that an ineligible city is disregarded for all purposes under this section and defines criteria that makes a city ineligible.
Effective January 1, 2017, amends GS 105-164.44M, as enacted in this act, to change the amount of taxes imposed by GS 105-164.4 that the Secretary must distribute monthly to the counties and cities to an amount equal to 24% (was, 17.39%) of the net proceeds of the sales and use tax imposed at the general rate of tax. Also amends the adjustment factor for the indicated counties.
Effective January 1, 2018, amends GS 105-164.44M, as enacted in this act, to change the amount of taxes imposed by GS 105-164.4 that the Secretary must distribute monthly to the counties and cities to an amount equal to 29.63% (was, 24%) of the net proceeds of the sales and use tax imposed at the general rate of tax. Makes additional changes to the county allocation and the distribution between counties and cities.
Repeals GS 105-164.44M(d1), concerning the phaseout of the adjustment factor and (d2), concerning the allocation of sales tax on food effective January 1, 2018.
Makes a conforming change to GS 105-536 (Limitations), deleting references to Articles 40 and 42, repealed in this act. Amends GS 105-537(a) to provide criteria under which the board of county commissioners may exercise its authority to levy a local sales and use tax at the rate of 0.25%. Effective January 1, 2016.
Amends GS 105-536, as amended by this act, to provide that Article 5 of GS Chapter 105 applies only to counties that levy a one-half percent (was, the first one-cent) sales and use tax under Article 39 of GS Chapter 105 or SL 1967-1096. Effective January 1, 2017.
Effective January 1, 2020, amends GS 105-537(a), as amended in this act, to provide that if a majority of voters in a special election approve the levy of the local sales and use tax, the board of county commissioners may, by resolution, after 10 days of public notice, levy a local sales and use tax at a rate of 0.25%.
Amends Article 39 of GS Chapter 105, adding new GS 105-464A, Reduction in Tax Rate, to provide that the tax rate authorized under Article 39 is one-half percent for sales occurring on or after January 1, 2017, and a county's resolution to levy a 1% local sales and use tax, enacted before January 1, 2017, is considered to be a resolution authorizing the levy of a one-half percent local sales and use tax under Article 39. Requires a board of elections that holds a special election on the question of repealing a local sales and use tax authorized under Article 39 to modify the form of the ballot question in accordance with the changes made by GS 105-464A. Also adds a new section to Chapter 1096 of the 1967 Session Laws, as amended, to specifically apply the provisions of new GS 105-464A to Mecklenburg County. Effective January 1, 2017.
Repeals Article 39 (first one cent local government sales and use tax) of GS Chapter 105 and SL 1967-1096 as amended by this act, effective January 1, 2018.
Effective January 1, 2018, amends Article 46, One-Quarter Cent County Sales and Use Tax, of GS Chapter 105. Makes a conforming change to reflect the repeal by this act of Article 39 of GS Chapter 105 and SL 1967-1096. Adds new subsections to GS 105-537, which provide for setting the effective date for the levy of a local sales and use tax by a county board of commissioners, the required process for the county board of commissioners to provide notification upon adopting a resolution levying the tax, and provisions regarding the collection and administration of the tax in GS 105-538. Provides details as to building materials that are exempt from the provisions of Article 46.
Enacts new GS 105-539 to provide information as to the scope of the sales and use tax, including sourcing and credit for tax paid. Also enacts new GS 105-540 regarding exemptions and refunds, and new GS 105-541 regarding the Secretary's responsibilities in the distribution of revenue from the sales and use tax collected. Enacts new GS 105-542 to provide the requirements for the repeal of a 0.25% sales and use tax, including the ballot question requirements. Makes additional conforming changes. Effective January 1, 2018, and applies to sales occurring on or after that date.
Provides that this act does not affect the rights or liabilities of a taxing county, a taxpayer, or another person that arise under a statute repealed by this act before the effective date of its repeal and does not affect the right to any refund or credit of a tax that accrued under the repealed statute before the effective date of its repeal.
Except as otherwise indicated, this act is effective when it becomes law.
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