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  • Summary date: Mar 30 2015 - View Summary

    Under current law, Articles 39, 40, and 42 of GS Chapter 105 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 39 (First One-Cent (1¢) Local Government Sales and Use Tax), 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). 

    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 6.75%. 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that the percentage rate of tax on food is 2% with the exception of the food items previously listed in GS 105-164.13B (repealed in this act) as not exempt from the sales and use tax. 

    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, providing 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 Revenue (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 29.63% of the net proceeds of the sales and use tax imposed at the general rate of tax.  Sets out provisions and the order for allocating the revenue to counties and cities, providing allocations for hold harmless amounts come first with remaining allocations being distributed to counties on a per capita basis. Requires the Secretary to determine hold harmless amounts, calculated as the sum of amount received by counties and municipalities under the specified Articles divided by 12. Directs the Secretary to determine a per capita figure for use in making distributions among a county in accordance with the method specified by the board of county commissioners, either by a Per Capita Method or an Ad Valorem Method, as specified. 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. Adds that no provisions of this act affect the rights or liabilities of a taxing county, a taxpayer, or another person arising under a statute repealed by this act before the effective date of its repeal, nor do they affect the right to any refund or credit of a tax accrued under the repealed statute.

    Amends GS 105-164.3(4a), concerning the levied combined general rate, providing that it is the state's general rate of tax in GS 105-164.4(a) plus 1/4 cent county sales and use tax authorized by Article 46 of GS 105 (was, plus the sum of rates of the local sales and use taxes).

    Amends GS 105-164.14(b) to increase the aggregate annual refund amount allowed for sales and use taxes paid for certain personal property by the specified entities for a fiscal year, increasing it to $45 million (was, $31.7 million). 

    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 as well as the required process for the county board of commissioners to provide notification upon adopting a resolution levying the tax.

    Amends GS 105-538 concerning the 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.

    Makes conforming changes to GS 105-507.2, Levy and collection of sales and use tax; 105-509.1, Levy and collection of sales and use tax-- regional public transportation authority; 105-510.1, Levy and collection of sales and use tax--regional transportation authority; and 105-511.3, Levy and collection of sales and use tax.

    Effective July 1, 2016, applying to sales made on or after that date.