Bill Summary for S 523 (2019-2020)

Summary date: 

Apr 5 2019

Bill Information:

View NCGA Bill Details2019-2020 Session
Senate Bill 523 (Public) Filed Tuesday, April 2, 2019
AN ACT TO MAKE VARIOUS CLARIFYING AND ADMINISTRATIVE CHANGES TO THE REVENUE LAWS.
Intro. by Tillman, Hise, Newton.

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Bill summary

Part I. Business Tax Changes

Amends GS 105-154(d), concerning payment of tax by a manager of a business on behalf of nonresident owners or partners of the business. Prohibits the manager from requesting a refund of an overpayment made on behalf of a nonresident owner or partner if the manager has previously filed the return and paid the tax due. Instead, permits the nonresident owner or partner to request a refund of an overpayment made on its behalf by the manger on its own income tax return, within the statute of limitations provisions of GS 105-241.6. Effective for taxable years beginning on or after January 1, 2019, and applies to a request for refund filed on or after that date.

Part II. Personal Income Tax Changes

Amends GS 105-153.8(e), concerning jointly filed income tax returns, to provide relief from liability on state tax returns for a spouse who qualifies for relief from liability for federal tax under section 6015 of the Internal Revenue Code (previously described the relief from tax liability attributive to a substantial understatement by the other spouse). Effective for taxable years beginning on or after January 1, 2018.

Part III. Sales and Use Tax Changes

Section 3.1

Amends GS 105-164.3, which sets forth defined terms applicable to Article 5, Sales and Use Tax. Adds the term item and defines the term to mean personal property, certain digital property, or a service, unless the context requires otherwise. Makes conforming changes throughout the statute and the Article to refer to an item, as appropriate, and modify the current use of "item" which does not intend the new term's meaning. Amends advertising and promotional direct mail and bundled transaction to refer to an item rather than a product. Amends capital improvement to exclude performing repairs or replacement of electrical components, gas logs, water heaters and similar tangible personal property (was, similar individual items) that are not part of new construction, reconstruction, or remodeling; repair, replacement or installation of electrical or plumbing components, water heaters, gutters, and similar tangible personal property (was, similar individual items) that are not part of new construction, reconstruction, or remodeling; or repair, replacement, or installation of gas logs, water heaters, pool heaters, and similar tangible personal property (was, similar individual items) that are not part of new construction, reconstruction, or remodeling. Adds a new defined term, certain digital property, and defines the term to mean an audio work, an audiovisual work, a book, magazine, a newsletter, a report, or another publication, or a photograph or greeting card, that is delivered or accessed electronically. Specifies that certain digital probably items specified are not considered tangible personal property and are taxable under the Article if sold in a tangible medium. Excludes an information service from certain digital property. Makes conforming changes throughout the statute and the Article to refer to certain digital property rather than digital property. Deletes the term computer supply. Amends delivery charges to refer to an item rather than personal property or services. Amends engaged in business to  include maintaining in the State certain digital property for the purpose of lease or rental. Amends landscaping to exclude services to trees, shrubs, flowers, or similar tangible personal property (was, similar items) in ports or in buildings. Modifies remote sale to include sale of an item by mobile phone application and making items accessible or performing a service sourced in this State. Amends sale or selling to include a transaction in which possession of the tangible personal property or certain digital property (was, property) is transferred but the seller retains title or security for the payment of consideration. Amends secondary metals recycler to refer to products rather than items. Updates streamlined agreement to reflect the agreement amended as of December 14, 2018. Excludes certain digital property, as defined, from telecommunications service. Makes further technical, clarifying, and conforming changes. 

Effective October 1, 2019, amends certain digital property, as enacted, to remove the qualification that the items described which are delivered or accessed electronically would be taxable under the Article if sold in a tangible medium.

Authorizes the Revisor of Statutes to make necessary technical and conforming changes. 

Section 3.2

Amends GS 105-164.4 to apply the general privilege tax rate of retailers, 4.75%, of the sales price of certain digital property, applicable regardless of whether the purchaser of the property has a right to use it permanently or to use it without making continued payments. Now provides that the general tax rate applies to the sales price of or gross receipts derived from the sale, repair, maintenance, and installation services to tangible personal property or certain digital property (previously did not include digital property), which generally becomes a part of or is applied to a purchaser's property, regardless of whether the property is taxed under another subdivision of the statute or is subject to a maximum tax under the statute. Adds that the use tax exemption in GS 105-164.27A(a3) for boats and aircraft can apply to these services. Makes conforming changes. 

Section 3.3

Amends GS 105-164.4B, regarding sourcing principles, to refer to sourcing the sale of an item rather than a product. Makes identical changes to the tax application provisions set forth in GS 105-164.4D regarding bundled transactions. 

Amends GS 105-164.4G, regarding tax on entertainment property. Specifies that the tax does not apply to tuition, registration fees, or charges to attend instructional seminars, conferences, or workshops for educational purposes, regardless that the activity is offered as an ancillary purpose of the event. Makes further conforming technical changes.

Makes technical, clarifying and conforming changes to GS 105-164.6 (Complementary use tax).

Amends GS 105-164.11B to specify that the provisions regarding recovering sale tax paid on items resold at retail to specify that the provisions apply to a retailer who pays tax on an item that is separately stated on an invoice or similar billing document given to the retailer at the time of sale. Make clarifying and technical changes.

Amends GS 105-164.12C, concerning food and drink merchants who give away food and drink to patrons or employees for immediate consumption, to make clarifying and technical changes.

Amends GS 105-164.13 to clarify that food and other products (was, items) lawfully purchased under the Supplemental Nutrition Assistance Program, as specified, are exempt frin sales tax under the statute. Also clarifies that the removal of waste, trash, debris, grease, snow, and other similar tangible personal property (was other similar items) from property, other than a motor vehicle, are exempt from tax under the Article. Similarly, clarifies the exemption (expiring January 1, 2020) for sales of repair, maintenance, and installation services for a transmission, engine, or rear-end gears, or any tangible personal property (was, any other item) that is purchased, leased, or rented to a professional motor sporting team or team member, as specified. Makes further clarifying and conforming changes.

Makes conforming and clarifying changes to GS 105-164.13E, concerning exemptions for farmers, specifying items (rather than tangible personal property and services) which can be exempt from tax under the statute. Makes further technical changes. 

Amends GS 105-164.14(a), concerning refunds for interstate carriers, to clarify that the refund applicant is to furnish the purchase price of the taxable personal property and services (rather than items) listed by the statute. Makes conforming changes.

Amends GS 105-164.16 to make organizational and technical changes.

Makes clarifying and conforming changes to GS 105-164.27A regarding a boat and aircraft direct pay permit.

Amends GS 105-164.42I, concerning certified service provider liability, to refer to a seller's liability for misrepresentation of types of items sold rather than types of products sold.

Amends GS 105-467 to provide local school administrative units and a joint agency created by interlocal agreement among units an annual refund of sales and use taxes on direct purchases of items, rather than direct purchases of tangible personal property and services.

Section 3.4

Further amends GS 105-164.4 to specify that separately stated charges billed to a customer for the installation of utilities is included in the combined general tax for gross receipts derived from providing telecommunication service and ancillary service, video programming to a subscriber, and from sales of electricity and piped natural gas. Further amends the definition of capital improvement in GS 105-164.3 to make clarifying changes, and specify that a utility can recover a portion of the cost of installation of utilities as a contribution in aid of construction, and those charges are included in the general gross receipts derived from services subject to the combined general rate under GS 105-164.4. Further amends GS 105-164.13 to clarify that the exemption does not apply to charges that are included in the gross receipts derived from services subject to the combined general rate under GS 105-164.4.

Section 3.5

Adds the terms taxing district and taxing area to GS 105-164.3. Amends GS 105-164.42L, authorizing the Secretary of Revenue (Secretary) to develop databases that provide information on the boundaries of taxing districts and their applicable tax rates (previously referred to taxing jurisdictions). Now provides that the databases can assign the proper tax rate and taxing district to each taxing area within the State. Requires the Secretary to assign the lowest combines tax rate within a specific taxing area where more than one tax rate applies. Provides for similar assignment for street address by nine-digit zip code or five-digit zip code. Makes further clarifying changes.

Section 3.6

Makes clarifying changes to GS 105-244.3 regarding sales tax base expansion protection.

Section 3.7

Makes clarifying changes to GS 105-244.4 regarding the reduction of certain sales tax assessments.

Section 3.8

Amends GS 105-537 to prohibit a county election of whether to levy a sales and use tax in the county from being held within one year from the date of the last preceding election under the same provision. Applies to elections held on or after July 1, 2019.

Section 3.9

Repeals Section 38.5(x) through Section 38.5(z) of SL 2018-5, which provided for various sales and use tax changes in GS Chapter 105. Makes conforming repeal to the applicable effective dates in Section 38.5(aa) of SL 2018-5.

Adds the terms property management contract, property management services and property manager to GS 105-164.3. Amends GS 105-164.4 to specify that a property management contract is taxable in accordance with GS 105-164.4K, as enacted. Enacts GS 105-164.4K to exempt property management services provided by a property manager under a property management contract from sales and use tax. Details three circumstances whereby repair, maintenance, and installation services taxable under the Article and provided by a property manager under a property management contract are subject to sales and use tax, including services directly provided for an additional charge which the property manager is not obligated to provide under the property management contract. When the property management services are not taxable, a retailer is to collect tax on items sold at retail from the property manager as the consumer, unless an exemption under GS 105-164.13 applies. When property management services are taxable, the property manager acts as a retailer, as specified. 

Part IV. Excise Tax Changes

Section 4.1

Amends GS 105-113.4A, concerning tobacco product licenses under Article 2A, to clarify that no tax refund is allowed when a licensee cancels (was, surrenders) a license.

Amends GS 105-113.4B to provide for the immediate return of a license by the licensee when the Secretary cancels a license. Also makes changes to refer to certified mail rather than registered mail regarding notice of revocation and notice of hearing.

Amends GS 105-113.21 to specify that the discount and refund provisions apply to licensed distributors.

Amends GS 105-113.10 to specify that the tax exemption applies to licensed manufacturers shipping to other licensed distributors. Clarifies that the exemption does not relieve the manufacturers from filing a report required of Part 2. Also clarifies that a tax exemption for a manufacturer shipping or temporarily storing its cigarettes at an affiliated manufacturer does not relieve the manufacturer from filing a report required of Part 2.

Section 4.2

Amends GS 105-113.5 to specify that the cigarette tax is levied on sales by a licensed distributor. Places primary liability of the tax with the licensed distributor who first acquires or otherwise handles subject cigarettes. Specifies that a licensed distributor who bring cigarettes made outside the State into the State is the first person to handle cigarettes in the State. Adds that a licensed distributor that is the cosignee of cigarettes made outside the State and shipped into the State is the first person to handle the cigarettes in the State.

Further amends GS 105-113.4A to require licensees to file applications for renewal in the same way as applications are filed to obtain a license. Expands the statute's provisions to apply to renewals. Adds that the Secretary can refuse to issue or renew a license if the applicant has failed to meet any of the license requirements set forth in existing subsection (b). Further amends GS 105-113.4B to allow the Secretary to revoke a license if the licensee fails to meet or maintain the requirements set out in GS 105-113.4A(b).

Amends GS 105-113.12 to provide that a distributor license is in effect until June 30 of the year following the second calendar year after the date of issuance or renewal. Establishes that a license for each place of business is renewable upon signed application with no renewal license tax unless applies for after the June 30 expiration date. Makes conforming changes. Requires an out of state distributor to also meet the provisions of GS 105-113.4A in order to obtain a license.

Amends GS 105-113.36 to clarify that wholesale dealers and retail dealers must obtain a tobacco products license and pay a license tax for each place of business, as defined in existing law. Maintains the license tax at $25 for wholesale dealers and $10 for retail dealers. Provides for the license to be in effect until June 30 of the year following the second calendar year after the date of issuance or renewal, unless canceled or revoked prior to expiration. Provides that a license for each place of business is renewable upon signed application with no renewal license tax unless applied for after expiration. Requires out-of-state whole sale dealers of tobacco products other than cigarettes to obtain a license upon compliance with GS 105-113.4A and payment of a $25 license tax.

Effective January 1, 2020. Establishes that any license issued under Article 2A on or before January 1, 2020, expires on June 30, 2020. Requires the Department of Revenue to notify licensees of the requirement of filing for renewal before June 30, 2020.

Section 4.3

Amends GS 105-113.18 to clarify reporting requirements accompanying cigarette tax payments. Provides that licensed distributors are required to file a monthly report covering cigarettes sold, shipped, delivered, or otherwise disposed of in the State, due within 20 days after the end of the month covered in the report (previously concerned sales and other activities; and provided separate reporting requirements for free cigarettes). Adds that the report must show the quantity of all cigarettes transported or caused to be transported into the State by the licensed distributor or licensed manufacturer in the State for sales in the State.

Amends GS 105-113.37 to clarify reporting requirements accompanying tobacco product tax payments. Provides that a monthly report must be filed that covers tobacco products sold, shipped, or otherwise disposed of in the State, due within 20 days after the end of the month covered by the report (previously, the report covered sales and other activities, and provided for designating exempt sales regarding intent to resell).

Section 4.4

Amends GS 105-113.26 to require licensees to keep complete and accurate records of all purchases, inventories, sales, shipments, and deliveries (was, all sales). Requires the records to be open for inspection by the Secretary or authorized agent at all times. Makes changes to enact identical provisions regarding wholesale dealers and retail dealers of tobacco products under GS 105-113.40, and further requires those dealers to safely preserve the records for a period of three years in a manner to ensure their security and accessibility for inspection.

Section 4.5

Amends GS 105-113.35 to provide that the tax on tobacco products and vapor products does not apply to a no cost sample tobacco product, other than cigarettes, limited to distribution at a qualified adult-only facility, as defined by specified federal law. Makes clarifying changes to subsection (d) concerning certain manufacturer's exemption from the tax if shipping tobacco products other than cigarettes to either a licensed wholesale dealer or retail dealer. Specifies that the exemption does not relieve the manufacturer of the statute's filing requirements. Modifies the limitations provided, to now prohibit a licensed wholesale dealer from selling, borrowing, loaning, or exchanging non-tax-paid tobacco products other than cigarettes to, from, or with another licensed dealer. Makes further clarifying and technical changes. 

Section 4.6

Enacts GS 105-113.35A to establish a tax for the sale or possession for sale by persons other than licensed wholesale dealers or retail dealers, and upon use, consumption, and possession for use or consumption tobacco products other than cigarettes within the State. Sets the rate as provided in GS 105-113.35, which is 12.8%. Exempts tobacco products other than cigarettes upon which the tax levied in GS 105-113.35 has been paid. Effective for taxable years beginning on or after January 1, 2019.

Section 4.7

Adds the terms consumer, delivery sale, deliver seller and delivery service to GS 105-113.4. Enacts GS 105-113.4F, applicable to delivery sales of tobacco products, other than cigars, to consumers in the State regardless of where the delivery occurs. Requires a delivery seller to obtain a license before accepting an order, comply with certain age verification requirements, and report, collect, and transmit all taxes levied on tobacco products other than cigars under  Articles 2A and 5. Requires a delivery seller to use a delivery service which obtains a signature of the person accepting delivery who is at least 18 years old and obtains proof of the age of the person accepting the delivery, as specified. Details additional filing requirements for a delivery seller, to be submitted to the Secretary in a memo or a copy of an invoice, no later than the tenth day of the month. Provides for compliance under the statute if a specified federal statute is complied with respect to tobacco products covered under the statute. Details information the memo or invoice must contain. Establishes a penalty of no more than $1,000 for the first violation, and no more than $5,000 for subsequent violations. Exempts tobacco products sold by a retailer who purchased them from a licensed distributor or wholesale dealer. Makes all laws applicable to tobacco product retailers also applicable to delivery sellers that sell tobacco products in the State.

Applies to delivery sales occurring on or after October 1, 2019.

Section 4.8

Amends the definition of wholesaler or importer in GS 104-113.68 as it applies to Article 2C, Alcoholic Beverage License and Excise Taxes. Now includes a resident winery and wine producer (previously did not include resident wine producer) that sells its wines, or wine produced from the permit under contract, at wholesale to a retailer or at retail and a resident brewery that sells its malt beverages or malt beverages produced for the permittee under contract at wholesale to a retailer or at retail (previously only resident breweries producing fewer than 25,000 barrels per year). Limits the terms to person who hold an unfortified winery permit, fortified winery permit, brewery permit, wine importer permit, wine wholesaler permit, malt beverages importer permit, malt beverages wholesaler permit, or wine producer permit.

Section 4.9

Amends GS 105-113.84 to expand the monthly reporting requirements to include resident wine producers. Clarifies that the report is informational, and adds that the report must include the amount of beverages sold, delivered, or shipped (was only delivered) to resident wholesalers, importers and purchasers under GS 18B-1001.1 during the period covered by the report. 

Section 4.10

Amends GS 105-449.47A, regarding tax on motor carriers, to allows the Secretary to refuse a license and issues a decal if the applicant failed to maintain motor vehicle registration on the qualified motor vehicle.

Section 4.11

Adds the term tank wagon for-hire to GS 105-449.60, concerning Article 36C, Gasoline, Diesel, and Blends. Defines the term as a truck designed or used to carry at least 1,000 gallons of motor fuel and the transporter is compensated for transporting motor fuel owned by another person. Includes the term in motor fuel transporter and transport truck. Makes technical change to refer to building storage rather than storage facilities in bulk-end user, and to remove the requirement of assigned of a terminal control number in terminal.

Section 4.12

Amends GS 105-449.81 to include in the motor fuel rate tax fuel alcohol (was referred to as fuel grade ethanol) which meets one of the qualifications previously specified. Makes conforming changes.

Section 4.13

Amends GS 105-449.105A to remove kerosene sales for the purpose of heating from those distributors can obtain a monthly refund.

Section 4.14

Amends GS 105-449.115 to require biodiesel providers to give a shipping document to the person who operated a railroad tank car or transport truck into which motor fuel is loaded at the terminal track or bulk plant rack.

Section 4.15

Amends GS 105-449.115A to add the destination state of the fuel to the information which must be included in the shipping document required of a person operating a tank wagon into which motor fuel is loaded for some other source.

Part V. Tax Compliance Changes

Amends GS 105-243.1 to extend the date by which a collection assistance fee is imposed from 30 to 60 days after an overdue tax debt remains unpaid. Makes technical and clarifying changes. 

Amends GS 105-236 to expand the civil penalty provisions of subdivision (a)(10) to include failure to return file the information returns required under Articles 2A and 2C. Applies to returns due to be filed on or after January 1, 2020.

Enacts GS 105-251.2(c1), authorizing the Secretary to request information of a franchisor with at least one resident franchisee, and the franchisor must provide the information, no more than one time per calendar year. Specifies information the Secretary can request, such as a return or a report. Defines the term as defined in specified federal law.

Enacts GS 105-251.3 to require every person that buys real property in the State from a nonresident seller to give information to the Secretary within 15 days of the closing date of the sale, including the seller's name, address and tax identification number if known, sales price, property address, and any other information required by the Secretary. Allows the Secretary to prescribe the manner of the report. 

Part VI. General Tax Administration Changes

Amends GS 105-241.6 to modify the contingent event exception from the general statute of limitations to request a refund of an overpayment. Allows the period to be extended once, as specified and subject to the restrictions and limitations provided, for litigation or a state audit, or other contingent events. Requires filing a written request to the Secretary prior to the expiration of the statute of limitations.

Amends GS 105-241.8 to specify that the date a federal amended return was filed is presumed to be the date recorded by the IRS.

Amends GS 105-228.90 to modify federal determination to mean a change or correction arising from an audit by the IRS Commissioner or an agreement of the US competent authority, and the change or correction has become final (previously did not provide for an agreement, and did not specify the correction is final). Describes when a federal determination is final. Makes conforming changes to GS 105-130.20 and GS 105-159 regarding federal determinations of federal taxable income.

Amends GS 105-163.1, which holds defined terms applicable to Article 4, Withholding. Adds the term Individual Taxpayer Identification Number (ITIN) and Taxpayer Identification Number (TIN). Specifies that applied for or expired ITIN numbers are included in ITIN holder. Adds the term payee. Makes conforming changes. Makes conforming changes to GS 105-163.3 concerning payors' withholding taxes. Effective January 1, 2020.

Amends GS 105-241.20, regarding delivery of notice, to include in the scope of the statute's provisions a denial of a refund (previously only the proposed denial of a refund).

Recodifies GS 105-128, Power of attorney, as GS 105-258.3, and makes clarifying and technical changes to the statute.

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