GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

H	1 

HOUSE BILL 753*

Short Title:  Sales Tax/Education/Salaries.	(Public)
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Sponsors: Representative Rhyne.
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Referred to:  Education.
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March 20, 1989

A BILL TO BE ENTITLED
AN ACT TO ESTABLISH A STATEWIDE CAREER DEVELOPMENT PROGRAM, ADOPT A GRADUATED TEACHER SALARY SCHEDULE, PROVIDE A SALARY INCREASE FOR TEACHERS AND STATE EMPLOYEES, INCREASE THE STATE SALES TAX, REDUCE THE STATE SALES TAX ON FOOD AND NON-PRESCRIPTION MEDICINE, PROVIDE FOR MONTHLY PAYMENT OF UTILITY SALES AND FRANCHISE TAXES, AND CREATE THE PUBLIC SCHOOL FINANCE FUND.
The General Assembly of North Carolina enacts:
Section 1.  This act shall be known as the Teacher and State Employee Career Development Act of 1989.
PART I.
Statewide Career Development Program.
Sec. 2.  Chapter 115C of the General Statutes is amended by adding a new Article to read:
“Article 24E.
"Career Development Program.
"§ 115C-363.29. Policy.
It is the policy of the State of North Carolina to provide an adequate base salary for and to encourage differentiation of all teachers and school administrators.  In furtherance of this policy, the General Assembly hereby establishes the Career Development Program.  Nothing in this Article may be construed to prohibit or discourage a career development program for noncertified employees of the public schools.
"§ 115C-363.30. Career Development Program.
The State Board of Education shall promulgate the Career Development Program.  The Program shall cover instructional personnel, instructional support personnel, and administrators who require certification by the State Board as a condition of employment.  The Program shall be implemented in all local school administrative units in 1989-90.  The State Board shall adopt rules and set standards necessary to carry out the provisions of the Program under this Article.
"§ 115-363.31. Elements of the Program.
(a)	The Program objective is to improve the quality of classroom instruction, to increase the attractiveness of teaching as a profession, and to encourage the recognition and retention of high quality teachers.
(b)	The Program shall be based on continuous, comprehensive evaluation of teacher performance as indicated by multiple sources of information.  Classroom performance shall be a significant part of the evaluation process and evaluation shall be based on indicators associated with effective classroom practices and other criteria.
(c)	In order to facilitate the placement and movement of personnel within the Program, the State Board may establish personnel policies designed to assure appropriate placement of employees at levels of differentiation in each local school administrative unit; provided, however, that arbitrary caps or quotas on the number of employees placed in each level of differentiation may not be established.  If there is evidence that a local school administrative unit is improperly placing employees at each level of differentiation, or is improperly evaluating employees pursuant to G.S. 115C-326, the State Board shall study the staffing patterns and performance evaluations for that unit and may take whatever corrective action it deems necessary.
(d)	The Program shall include a process for administration, periodic review, and evaluation.  The criteria and procedures for advancement under the Program shall be made public and instruction shall be provided for teachers about these criteria and procedures prior to the implementation of the process.
(e)	The Program shall provide for a teacher to move to a lower career status either by the teacher's choice or based on unacceptable performance review. The Program shall provide an appeal process that provides prompt and impartial review of decisions to move a teacher to a lower level in the Program because of unacceptable performance.
(f)	The Program for instructional personnel and instructional support personnel shall be designed to give an employee increasing responsibility, recognition, and pay as the employee gains experience and professional ability.  Levels of differentiation shall be based on an employee's initiative and desire to increase his professional abilities and on his success in doing so.  The program shall further provide for annual methods of evaluation using practicing educators, opportunities to correct deficiencies, and dismissal of employees who, after ample opportunities, are unable or refuse to perform.
(g)	The Program for administrators shall be designed to give each administrator, including the superintendent, clear opportunities for advancement, recognition, and increased pay if the employee demonstrates high effectiveness in the position. Levels of differentiation shall be based on the employee's initiative and desire to increase his professional abilities and his success in doing so.  The Program for administrators shall include methods and instruments of evaluation that will determine what level of performance, effort, and ability and what accomplishments warrant different salary classifications, and at what point dismissal or reassignment of an administrator is warranted.
The Program for administrators shall be comparable to the Program for instructional personnel and instructional support personnel except that (i)	administrators participating in the Program shall waive their rights as administrators under G.S. 115C-325, and (ii) evaluation of the administrator shall be the responsibility of the local superintendent or the superintendent's designee.  The salary differentiation steps for administrators shall  track the salary differentiation steps for teachers as defined in this Article.  The superintendent shall be evaluated by the local school board using performance standards developed by the State Board of Education or by local boards of education.
"§ 115C-363.32. Levels of differentiation; salary.
(a)	During the first and second years of employment, the employee shall be assigned ‘initial status' and shall be paid in accordance with the State base salary schedule.  A mentor or a support team shall be assigned to the employee for assistance and professional development.
(b)	During the third year of employment, the employee who is fully certified shall be assigned ‘provisional status' and shall be paid in accordance with the State base salary schedule.
(c)	If by the end of the third year the employee meets the evaluation standards established by the State Board of Education and is recommended for promotion to ‘Career Status I' by the local board of education, Career Status I shall be conferred upon the employee and, effective with the next ensuing fiscal year, the employee shall receive a salary equal to one hundred five percent (105%) of the employee's base salary as provided in the State salary schedule.
If by the end of the third year the employee's evaluation has not been at least standard in all functions, the principal shall recommend the employee for contract termination.
(d)	No earlier than the third year in Career Status I, the employee may apply for ‘Career Status II'. If by the end of the third year in Career Status I the employee meets the evaluation standards established by the State Board of Education and is recommended for promotion to Career Status II by the local board of education, Career Status II shall be conferred upon the employee and, effective with the next ensuing fiscal year, the employee shall receive a salary equal to one hundred fifteen percent (115%) of the employee's base salary as provided in the State salary schedule.
A Career Status II employee whose annual evaluation(s)	indicate that the employee is not maintaining the standards required to remain in Career Status II shall be formally reevaluated.  If the formal reevaluation indicates that the employee is not maintaining the required performance level, the principal shall recommend a reclassification of that employee.
A Career Status II employee may move voluntarily to Career Status I.
(e)	No earlier than the third year in Career Status II the employee may apply for ‘Career Status III'. If by the end of the third year in Career Status II the employee meets the evaluation standards established by the State Board of Education or performance criteria established by the local board of education and approved by the State Board and is recommended for promotion to Career Status III by the local board of education, Career Status III shall be conferred upon the employee and, effective with the next ensuing fiscal year, the employee shall receive a salary equal to one hundred twenty-five percent (125%) of the employee's base salary as provided in the State salary schedule.
A Career Status III employee whose annual evaluation(s)	indicate that the employee is not maintaining the standards required to remain in Career Status III shall be formally reevaluated.  If the formal reevaluation indicates the employee is not maintaining the required performance, the principal shall recommend a reclassification of that employee.
A Career Status III employee may move voluntarily to Career Status II.
"§ 115C-363.33. Reclassification; appeals.
(a)	Any employee who is denied an advanced career status or whose career status is reduced by decision of the local board of education shall have an opportunity for appeal.  The employee may request and upon request shall be provided a review by a three-member appeals panel chosen from a roster of trained evaluators.  One member of the panel shall be chosen by the principal and approved by the superintendent, one shall be chosen by the employee, and one shall be chosen jointly by the principal and the employee.  The panel shall report its findings to the employing local board of education and the local board shall take final action on the matter.
(b)	If an employee is reclassified to a lower career status, either voluntarily or by decision of the local board of education, the employee may receive no more than the salary appropriate for a person in the career status level to which the employee was reclassified; provided, however, that a reclassification may not be considered a demotion for purposes of G.S. 115C-325.
"§ 115C-363.34. Additional duties for Career Status II and Career Status III teachers.
A Career Status II teacher or a Career Status III teacher may apply for additional  responsibilities during the 10-month school year. Responsibilities for which the employee may apply and be selected shall be based on the needs of the local school administrative unit and shall include duties requiring a leadership role in instruction areas and not routine duties.  These duties may include being a mentor teacher, supervising student teachers, curriculum development, being a staff development leader/coordinator, and serving as department chairman or grade chairman.  Career Status III teachers shall receive first consideration for duties such as serving as department chairman, grade level chair, or lead teacher.  Career Status II teachers shall receive first consideration for duties such as being a mentor teacher, supervising student teachers, and leadership in curriculum study and development, accreditation study, program evaluation and research, materials development, staff training, and special projects.  An employee shall receive additional pay for any month in which he performs these duties at a rate determined by the local board of education.
A Career Status II or Career Status III teacher may also apply for employment during the summer in teaching, curriculum development, and staff development.  The employee's salary and benefits during the summer shall be at the same rate as the employee's base salary during the previous 10-month school year.
Local units shall receive an allocation of summer months of employment for summer school teaching, curriculum development, and staff development.  The allocation shall be one month of employment for each of 10 State-allocated teachers.
The State Board of Education shall allocate funds to local school administrative units to compensate Career Status II and Career Status III teachers for extra duties performed.  These funds shall be allocated on an average daily membership basis from the base of five percent (5%) of the annual salary of individuals on Career Status II and Career Status III levels.  Up to ten percent (10%) of the allocation to a local school administrative unit may be used for substitute pay to provide released time for teachers approved to perform specified leadership tasks that must be performed during class hours.
Local school administrative units shall assign any extra duties to Career Status II and Career Status III teachers, pursuant to this section, in such a way as to minimize the time these teachers spend away from their classes during regular class hours.
"§ 115C-363.35.  Evaluators.
The State Board of Education shall establish an appropriate training program for evaluators and administrators who carry out the provisions of this Article.  The State Board shall also set standards for the qualification of evaluators, and shall assist each local unit in implementing the evaluator and administrator training programs established by the Board.
The local board of education in each local administrative unit shall select and train evaluators who shall meet evaluation standards set by the State Board of Education and who shall work with principals in carrying out the appropriate provisions of the Career Development Program.
Each evaluator shall be a practicing educator temporarily assigned to such duties and shall be employed by the local board for which the evaluator is serving as an evaluator.  Evaluators shall be paid the same salary as supervisors on the State base salary schedule.  The State Board shall adopt rules regarding the employment and use of evaluators.
Local boards of education may apply to the State Board of Education for approval of variances from the requirements of this section when such variances will, in the judgment of the State Board, enhance the effective implementation of the Program.
"§ 115C-363.36. Local coordinator of career development.
The State Board of Education shall allot at least 12 months of professional staff time to each local administrative unit for a coordinator of career development.  The coordinator's pay grade shall be set by the State Board within funds appropriated for this purpose.
"§ 115C-363.37. Implementation of Career Development Program.
Effective July 1, 1989, local school administrative units shall prepare to implement the Career Development Program.  All local units shall use the evaluation process adopted by the State Board.  In addition to using the State appraisal instrument and the evaluation process adopted by the State Board, local units may develop and implement an alternative evaluation program approved in advance by the State Board.
Notwithstanding the time-in-status provisions of G.S. 115C-363.32 and in order to fully implement the Career Development Program as rapidly as possible, the following shall apply:
(1)	During fiscal year 1989-90, all employees with 20 or more years of service may elect to be candidates for advancement to Career Status I.  Candidates who are recommended for promotion to Career Status I pursuant to this subdivision shall be advanced to Career Status I as of July 1, 1990.
(2)	Beginning July 1, 1990, employees advanced to Career Status I pursuant to subdivision (1) above may elect to be candidates for advancement to Career Status II.  Candidates who are recommended for promotion to Career Status II pursuant to this subdivision shall be advanced to Career Status II as of July 1, 1992.
(3)	On July 1, 1989, employees who have participated in the Certified School Personnel Evaluation Pilot Program established in Article 24A of the General Statutes, or in the Career Development Pilot Program established in Article 24B of the General Statutes and have been recommended for promotion to Career Status I or Career Status II shall be advanced and receive the salary commensurate with their status as provided in G.S. 115C-363.32.
(4)	Beginning July 1, 1990, all employees eligible for ‘career status' pursuant to G.S. 115C-325 may elect to be candidates for advancement to Career Status I.  Candidates who are recommended for promotion to Career Status I pursuant to this subdivision shall be advanced to Career Status I as of July 1, 1991.
"§ 115C-363.38.  Employees' option to participate in the Career Development Program.
An individual employed by a local board of education prior to the implementation in that local school administrative unit of a program or plan applicable to that employee may opt to participate in the Career Development Program established by this Article or to continue under the system of employment in effect prior to implementation of the Career Development Program.
A person employed by a local board of education after the implementation in that local school administrative unit of a plan or program applicable to him shall participate in the Career Development Program and may not elect to be under a system of employment in effect prior to the time the person was employed."
Sec. 3.  There is appropriated from the General Fund to the Department of Public Education the sum of fifty million one hundred thousand dollars ($50,100,000) for the 1989-90 fiscal year, and the sum of seventy-eight million six hundred thousand dollars ($78,600,000) for the 1990-91 fiscal year to be used for statewide implementation of the Career Development Program.
PART II.
Teacher Salary Schedule.
Sec. 4. (a) Effective July 1, 1989, the following salary schedule shall be applicable to certified personnel of the public schools who are classified as "A”teachers:
1989-90	1990-91	1991-92
YEARS OF	ANNUAL	ANNUAL	ANNUAL
EXPER.  	SALARY	SALARY	SALARY
0	$19,120	$19,780	$20,500
1	19,580	20,230	20,910
2	19,740	20,610	21,330
3	19,900	20,900	21,750
4	20,070	21,200	22,190
5	20,760	21,500	22,630
6	21,660	22,080	23,090
7	21,830	22,780	23,550
8	22,010	23,100	24,020
9	22,640	23,430	24,500
10	22,820	23,990	24,990
11	23,010	24,330	25,490
12	23,820	24,680	26,000
13	24,020	25,350	26,520
14	24,850	25,710	27,050
15	25,050	26,410	27,590
16	25,930	26,790	28,140
17	26,880	27,520	28,700
18	27,100	28,300	29,280
19	28,100	28,690	29,860
20	28,330	29,510	30,460
21	29,360	29,930	31,070
	22	29,590	30,770	31,690
	23	29,830	31,200	32,330
	24	30,080	31,640	32,970
	25	30,330	32,090	33,630
	26	30,580	32,540	34,310
	27	30,850	33,010	34,990
	28	31,110	33,490	35,690
29+	31,380	33,970	36,400
Longevity payments for years 1989-90 and beyond are included in the salary schedule amounts for those years.
(b) Effective July 1, 1989, the following salary schedule shall be applicable to certified personnel who are classified as "G”teachers:
1989-90	1990-91	1991-92
YEARS OF	ANNUAL	ANNUAL	ANNUAL
EXPER.  	SALARY	SALARY	SALARY
0	20,690	21,140	21,530
1	21,270	21,780	21,960
2	21,470	22,110	22,390
3	21,670	22,450	22,840
4	21,880	22,790	23,300
5	22,640	23,150	23,770
6	23,390	23,760	24,240
7	23,620	24,370	24,730
8	23,840	24,750	25,220
9	24,630	25,130	25,720
10	24,860	25,770	26,240
11	25,100	26,170	26,760
12	25,350	26,570	27,300
13	26,190	26,980	27,840
14	27,090	27,680	28,400
15	27,350	28,410	28,970
16	28,310	28,850	29,550
17	28,580	29,610	30,140
18	29,560	30,070	30,740
19	29,840	30,860	31,360
20	30,890	31,330	31,990
21	31,190	32,170	32,620
22	32,270	32,660	33,280
23	32,580	33,530	33,940
24	32,890	34,040	34,620
25	33,210	34,570	35,310
26	33,530	35,100	36,020
27	33,860	35,640	36,740
28	34,200	36,200	37,480
29+	34,540	36,760	38,230
Longevity payments for years 1989-90 and beyond are included in the salary schedule amounts for those years.
(c) Educators shall be placed on the new salary schedule based on years of experience and shall receive the salary increases necessary to bring them to the appropriate level on the schedule; provided, however, that no educator's salary may be reduced as a result of the educator's placement on the salary schedule.
(d) Enactment of this salary schedule may not be construed to diminish or rescind additions to salary amounts provided by law for teacher participation in the Career Development Program.
(e) The State Board of Education shall adopt rules necessary to implement this act.
Sec. 5. There is appropriated from the General Fund to the Department of Public Education the sum of one hundred three million five hundred thousand dollars ($103,500,000) for the 1989-90 fiscal year, and the sum of one hundred ninety-seven million dollars ($197,000,000) for the 1990-91 fiscal year, to be used for the implementation of the new salary schedule for "A”and "G”teachers as set forth in Section 4 of this act.
PART III.
Salary Increase For State Employees.
––-PURPOSE
Sec. 6.  The purpose of this Part is to grant an across-the-board salary increase of four percent (4%) to State employees subject to the State Personnel Act for fiscal year 1989-90 and an additional across-the-board salary increase of three percent (3%) to State employees subject to the State Personnel Act for fiscal year 1990-91; to establish a reserve to be awarded to such employees as performance pay in accordance with legislation to be enacted by the 1989 General Assembly, such performance pay for fiscal year 1989-90 to be retroactive to July 1, 1989; and to grant to State employees and officers, to University of North Carolina employees, and to community college personnel supported by State funds, not subject to the State Personnel Act,  salary increases as set out in this Part.
––-APPROPRIATIONS
Sec. 7. (a) There is appropriated from the General Fund to a Reserve in the Office of State Budget and Management for fiscal year 1989-90 the sum of forty-nine million five hundred forty-six thousand dollars ($49,546,000) and for fiscal year 1990-91 the sum of eighty-eight million nine hundred thirty-six thousand dollars ($88,936,000) to provide a four percent (4%) across-the-board salary increase in fiscal year 1989-90 and a three percent (3%) across-the-board salary increase in fiscal year 1990-91, to State employees subject to the State Personnel Act.
(a1) There is appropriated from the Highway Fund to a Reserve in the Office of State Budget and Management for fiscal year 1989-90 the sum of eleven million seven hundred thirty thousand dollars ($11,730,000) and for fiscal year 1990-91 the sum of twenty million seven hundred thirty thousand dollars ($20,730,000) to provide a four percent (4%) across-the-board salary increase in fiscal year 1989-90 and a three percent (3%) across-the-board salary increase in fiscal year 1990-91, to State employees subject to the State Personnel Act.
(b) There is appropriated from the General Fund to a Reserve in the Office of State Budget and Management for fiscal year 1989-90 the sum of twenty-four million seven hundred seventy-three thousand dollars ($24,773,000) and for fiscal year 1990-91 the sum of fifty-one million thirty-three thousand dollars ($51,033,000) for performance pay for State employees subject to the State Personnel Act.
(b1) There is appropriated from the Highway Fund to a Reserve in the Office of State Budget and Management for fiscal year 1989-90 the sum of five million eight hundred seventy thousand dollars ($5,870,000) and for fiscal year 1990-91 the sum of eleven million eight hundred seventy thousand dollars ($11,870,000) for performance pay for State employees subject to the State Personnel Act.
(c) There is appropriated from the General Fund to a Reserve in the Office of State Budget and Management for fiscal year 1989-90 the sum of one hundred eighteen million eight hundred forty-two thousand dollars ($118,842,000) and for fiscal year 1990-91 the sum of two hundred twenty-six million four hundred twenty-four thousand dollars ($226,424,000) to provide the salary increase to State employees not subject to the State Personnel Act.
––-MOST STATE EMPLOYEES AND NON-TEACHING PUBLIC SCHOOL EMPLOYEES/SALARY INCREASES
Sec. 8.  (a)	The salaries in effect for fiscal year 1988-89 for all permanent full-time State employees who are subject to the State Personnel Act and who are paid from the General Fund or the Highway Fund shall be increased, on and after July 1, 1989, unless otherwise provided by this Part, by an average of four percent (4%), rounded to conform to the steps in the salary ranges adopted by the State Personnel Commission.  If an employee's salary for fiscal year 1988-89 is not equal to a specific pay rate on the 1988-89 salary schedule, his salary increase, effective July 1, 1989, unless otherwise provided by this Part, shall be four percent (4%) with the annual salary adjusted so as to be divisible by 12.
(a1) The salaries in effect for fiscal year 1989-90 for all permanent full-time State employees who are subject to the State Personnel Act and who are paid from the General Fund or the Highway Fund shall be increased, on and after July 1, 1990, unless otherwise provided by this Part, by an average of three percent (3%), rounded to conform to the steps in the salary ranges adopted by the State Personnel Commission.  If an employee's salary for fiscal year 1989-90 is not equal to a specific pay rate on the 1989-90 salary schedule, his salary increase, effective July 1, 1990, unless otherwise provided by this Part, shall be three percent (3%) with the annual salary adjusted so as to be divisible by 12.
(b) Except as otherwise provided in this act, the fiscal year 1988-89 salaries for permanent full-time State officials and persons in exempt positions that are recommended by the Governor or the Governor and the Advisory Budget Commission and set by the General Assembly shall be increased by an average of six percent (6%), commencing July 1, 1989.
(b1) Except as otherwise provided in this act, the fiscal year 1989-90 salaries for permanent full-time State officials and persons in exempt positions that are recommended by the Governor or the Governor and the Advisory Budget Commission and set by the General Assembly shall be increased by an average of five percent (5%), commencing July 1, 1990.
(c) The salaries in effect for fiscal year 1988-89 for all permanent part-time State employees shall be increased on and after July 1, 1989, by pro rata amounts of the same percentage average salary increase provided if they were permanent full-time employees covered by the provisions of this section.
(c1) The salaries in effect for fiscal year 1989-90 for all permanent part-time State employees shall be increased on and after July 1, 1990, by pro rata amounts of the same percentage average salary increase provided if they were permanent full-time employees covered by the provisions of this section.
(d) The Director of the Budget may allocate out of special operating funds or from other sources of the employing agency, except tax revenues, sufficient funds to allow a salary increase, on and after July 1, 1989, and on and after July 1, 1990, in the percentage provided by this Part, including funds for the employer's retirement and Social Security contributions, for the permanent full-time and part-time employees of the agency, provided the employing agency elects to make available the necessary funds.
(e) Within regular Executive Budget Act procedures as limited by this act, all State agencies and departments may increase on an equitable basis the rate of pay of temporary and permanent hourly State employees, subject to availability of funds in the particular agency or department, by pro rata amounts of the percentage average salary increase provided for permanent full-time employees covered by the provisions of this section, commencing July 1, 1989 and July 1, 1990.
(f) The salaries in effect for fiscal year 1988-89 for all permanent non-teaching full-time public school employees supported by State funds and paid from the State public school fund and from other special allocations to local public school units shall be increased by an average of six percent (6%), rounded to conform to the steps in the salary ranges adopted by the State Board of Education, commencing July 1, 1989.
The salaries in effect for fiscal year 1988-89 for all permanent part-time public school employees supported by State funds and paid from the State public school fund and from other special allocations to local public school units shall be increased by pro rata amounts of the six percent (6%) average salary increase provided for permanent full-time employees covered by the provisions of this subsection.
(f1) The salaries in effect for fiscal year 1989-90 for all permanent non-teaching full-time public school employees supported by State funds and paid from the State public school fund and from other special allocations to local public school units shall be increased by an average of five percent (5%), rounded to conform to the steps in the salary ranges adopted by the State Board of Education, commencing July 1, 1990.
The salaries in effect for fiscal year 1989-90 for all permanent part-time public school employees supported by State funds and paid from the State public school fund and from other special allocations to local public school units shall be increased by pro rata amounts of the five percent (5%) average salary increase provided for permanent full-time employees covered by the provisions of this subsection.
(g) The fiscal year 1988-89 pay rates adopted by local boards of education for school bus drivers shall be increased by at least six percent (6%), on and after July 1, 1989, to the extent that such rates of pay are supported by the allocation of State funds from the State Board of Education.  Local boards of education shall increase the rates of pay for all school bus drivers who were employed during fiscal year 1988-89 and who continue their employment for fiscal year 1989-90 by at least six percent (6%) on and after July 1, 1989.
(g1) The fiscal year 1989-90 pay rates adopted by local boards of education for school bus drivers shall be increased by at least five percent (5%), on and after July 1, 1990, to the extent that such rates of pay are supported by the allocation of State funds from the State Board of Education.  Local boards of education shall increase the rates of pay for all school bus drivers who were employed during fiscal year 1989-90 and who continue their employment for fiscal year 1990-91 by at least five percent (5%) on and after July 1, 1990.
––-COMMUNITY COLLEGES PERSONNEL/SALARY INCREASES
Sec. 9. (a) The Director of the Budget may transfer from the salary increase reserve fund created for fiscal year 1989-90 funds necessary to provide an average annual salary increase of six percent (6%), including funds for the employer's retirement and Social Security contributions, commencing July 1, 1989, for all permanent community college institutional personnel supported by State funds.  Subject to the availability of funds, the salaries for temporary community college institutional personnel may be increased by pro rata amounts of the six percent (6%) average annual salary increase provided for permanent institutional employees.  These funds may not be used for any purpose other than for the salary increases and necessary employer contributions.
(b) The Director of the Budget may transfer from the salary increase reserve fund created for fiscal year 1990-91 funds necessary to provide an average annual salary increase of five percent (5%), including funds for the employer's retirement and Social Security contributions, commencing July 1, 1990, for all permanent community college institutional personnel supported by State funds.  Subject to the availability of funds, the salaries for temporary community college institutional personnel may be increased by pro rata amounts of the five percent (5%) average annual salary increase provided for permanent institutional employees.  These funds may not be used for any purpose other than for the salary increases and necessary employer contributions.
––-HIGHER EDUCATION PERSONNEL/SALARY INCREASES
Sec. 10. (a) The Director of the Budget may transfer from the salary increase reserve fund created for fiscal year 1989-90 funds necessary to provide an annual average salary increase of six percent (6%), including funds for the employer's retirement and Social Security contributions, commencing July 1, 1989, for all employees of The University of North Carolina supported by State funds who are exempt from the State Personnel Act.  These funds shall be allocated to individuals according to rules adopted by the Board of Governors and may not be used for any purpose other than for the salary increases and necessary employer contributions.
(b) The Director of the Budget may transfer from the salary increase reserve fund created for fiscal year 1990-91 funds necessary to provide an annual average salary increase of five percent (5%), including funds for the employer's retirement and Social Security contributions, commencing July 1, 1990, for all employees of The University of North Carolina supported by State funds who are exempt from the State Personnel Act.  These funds shall be allocated to individuals according to rules adopted by the Board of Governors and may not be used for any purpose other than for the salary increases and necessary employer contributions.
––-GOVERNOR'S SALARY INCREASE
Sec. 11. (a) Effective July 1, 1989, G.S. 147-11(a) reads as rewritten:
"(a)	The salary of the Governor shall be one hundred sixteen thousand three hundred sixteen dollars ($116,316) annually, payable monthly."
(b) Effective July 1, 1990, G.S. 147-11(a) as amended by subsection (a) of this section reads as rewritten:
"(a)	The salary of the Governor shall be one hundred twenty-two thousand one hundred thirty-six dollars ($122,136) annually, payable monthly."
––-COUNCIL OF STATE/SALARY INCREASE
Sec. 12.  The annual salaries for members of the Council of State, payable monthly, for the following fiscal years are:
Council of State	1989-90	1990-91
Lieutenant Governor	$ 70,992	$74,544
Attorney General	 70,992	74,544
Secretary of State	 70,992	74,544
State Treasurer	 70,992	74,544
State Auditor	 70,992	74,544
Superintendent of Public Instruction	 70,992	74,544
Agriculture Commissioner	 70,992	74,544
Insurance Commissioner	 70,992	74,544
Labor Commissioner	 70,992	74,544.
––-NONELECTED DEPARTMENT HEAD/SALARY INCREASES
Sec. 13.  In accordance with G.S. 143B-9, the maximum annual salaries, payable monthly, for the nonelected heads of the principal State departments for the following fiscal years are:
Nonelected Department Heads	Annual Salary
Secretary of Administration	$ 70,992	$74,544
Secretary of Commerce	 70,992	74,544
Secretary of Correction	 70,992	74,544
Secretary of Crime Control and
Public Safety	 70,992	74,544
Secretary of Cultural Resources	 70,992	74,544
Secretary of Human Resources	 70,992	74,544
Secretary of Natural Resources
and Community Development	 70,992	74,544
Secretary of Revenue	 70,992	74,544
Secretary of Transportation	 70,992	74,544.
––-LEGISLATORS/SALARY AND EXPENSE INCREASES
Sec. 14. Effective upon convening of the 1991 Regular Session of the General Assembly, G.S. 120-3 reads as rewritten:
"§ 120-3. Pay of members and officers of the General Assembly.
(a)	The Speaker of the House shall be paid an annual salary of thirty-four thousand seven hundred sixty-four dollars ($34,764), payable monthly, and an expense allowance of one thousand one hundred seventy-five dollars ($1,175) per month.  The President Pro Tempore of the Senate shall be paid an annual salary of twenty-one thousand two hundred sixty-four dollars ($21,264), payable monthly, and an expense allowance of eight hundred thirty-three dollars ($833.00) per month.  The Speaker Pro Tempore of the House shall be paid an annual salary of nineteen thousand five hundred eighty-four dollars ($19,584), payable monthly, and an expense allowance of six hundred ninety-four dollars ($694.00) per month; and the Deputy President Pro Tempore of the Senate shall be paid an annual salary of seventeen thousand nine hundred four dollars ($17,904), payable monthly, and an expense allowance of five hundred fifty-four dollars ($554.00) per month.  The majority and minority leaders in the House and the majority and minority leaders in the Senate shall be paid an annual salary of fifteen thousand two hundred forty dollars ($15,240), payable monthly, and an expense allowance of five hundred fifty-four dollars ($554.00) per month.
(b)	Every other member of the General Assembly shall receive increases in annual salary only to the extent of and in the amounts equal to the average increases received by employees of the State, effective upon convening of the next Regular Session of the General Assembly after enactment of these increased amounts.  Accordingly, upon convening of the 1991 Regular Session of the General Assembly, every other member of the General Assembly shall be paid an annual salary of twelve thousand three hundred eighty-four dollars ($12,384), payable monthly, and an expense allowance of four hundred sixty-five dollars ($465.00) per month.
(c)	The salary and expense allowances provided in this section are in addition to any per diem compensation and any subsistence and travel allowance authorized by any other law with respect to any regular or extra session of the General Assembly, and service on any State board, agency, commission, standing committee and study commission."
––-GENERAL ASSEMBLY PRINCIPAL CLERKS/SALARY INCREASES
Sec. 15.  G.S. 120-37(c) reads as rewritten:
"(c)	The principal clerks shall be full-time officers. Each principal clerk shall be entitled to other benefits available to permanent legislative employees and shall be paid an annual salary of forty-three thousand five hundred forty-eight dollars ($43,548) from July 1, 1989 through June 30, 1990, and an annual salary of forty-five thousand seven hundred twenty dollars ($45,720) on and after July 1, 1990, payable monthly. The Legislative Services Commission shall review the salary of the principal clerks prior to submission of the proposed operating budget of the General Assembly to the Governor and Advisory Budget Commission and shall make appropriate recommendations for changes in those salaries. Any changes enacted by the General Assembly shall be by amendment to this paragraph."
––-SERGEANT-AT-ARMS AND READING CLERKS/SALARY INCREASES
Sec. 16.  G.S. 120-37(b) reads as rewritten:
"(b)	The sergeant-at-arms and the reading clerk in each house shall be paid a salary of one hundred ninety-seven dollars ($197.00) per week from July 1, 1989 through June 30, 1990, and two hundred seven dollars ($207.00) per week on and after July 1, 1990, plus subsistence at the same daily rate provided for members of the General Assembly, plus mileage at the rate provided for members of the General Assembly for one round trip only from their homes to Raleigh and return. The sergeants-at-arms shall serve during sessions of the General Assembly and at such time prior to the convening of, and subsequent to adjournment or recess of, sessions as may be authorized by the Legislative Services Commission. The reading clerks shall serve during sessions only."
––-LEGISLATIVE EMPLOYEES/SALARY INCREASES
Sec. 17. (a) The Legislative Administrative Officer may increase the salaries of nonelected employees of the General Assembly in effect for fiscal year 1988-89 by an amount equal to six percent (6%), rounded to conform to the steps in the salary ranges adopted by the Legislative Services Commission, commencing July 1, 1989.  Nothing in this Part limits any of the provisions of G.S. 120-32.
(b) The Legislative Administrative Officer may increase the salaries of nonelected employees of the General Assembly in effect for fiscal year 1989-90 by an amount equal to five percent (5%), rounded to conform to the steps in the salary ranges adopted by the Legislative Services Commission, commencing July 1, 1990.  Nothing in this Part limits any of the provisions of G.S. 120-32.
––-JUDICIAL BRANCH OFFICIALS/SALARY INCREASE
Sec. 18. (a)	The annual salaries, payable monthly, for specified judicial branch officials for following fiscal years are:
Judicial Branch Officials	1989-90	1990-91
Chief Justice, Supreme Court	$ 86,232	$90,540
Associate Justice, Supreme Court	 84,456	88,680
Chief Judge, Court of Appeals	 81,756	85,848
Judge, Court of Appeals	 79,968	83,964
Judge, Senior Regular Resident
Superior Court	 73,332	77,004
Judge, Superior Court	 70,992	74,544
Chief Judge, District Court	 62,628	65,760
Judge, District Court	 60,240	63,252
District Attorney	 66,060	69,360
Assistant District Attorney - an
average of	 42,732	44,868
Administrative Officer of the Courts	 73,332	77,004
Assistant Administrative Officer
of the Courts	 59,772	62,760
Public Defender	 66,060	69,360
Assistant Public Defender - an
average of	 42,732	44,868
If an acting senior regular resident superior court judge is appointed under the provisions of G.S. 7A-41, he shall receive the salary for Judge, Senior Regular Resident, Superior Court, until his temporary appointment is vacated, and the judge he replaces shall receive the salary indicated for Judge, Superior Court.
The district attorney or public defender of a judicial district, with the approval of the Administrative Officer of the Courts, shall set the salaries of assistant district attorneys or assistant public defenders, respectively, in that district such that the average salaries of assistant district attorneys or assistant public defenders in that district do not exceed forty-two thousand seven hundred thirty-two dollars ($42,732) effective July 1, 1989, and forty-four thousand eight hundred sixty-eight dollars ($44,868) effective July 1, 1990, and the minimum salary of any assistant district attorney or assistant public defender is at least twenty-one thousand five hundred seventy-six dollars ($21,576) effective July 1, 1989, and twenty-two thousand six hundred fifty-six dollars ($22,656) effective July 1, 1990.
(b) The salaries in effect for fiscal year 1988-89 for permanent employees of the Judicial Department, except for those whose salaries are itemized in this Part, shall be increased by an amount, commencing July 1, 1989, equal to six percent (6%), rounded to conform to the steps in the salary ranges adopted by the Judicial Department.
(c) The salaries in effect for fiscal year 1989-90 for permanent employees of the Judicial Department, except for those whose salaries are itemized in this Part, shall be increased by an amount, commencing July 1, 1990, equal to five percent (5%), rounded to conform to the steps in the salary ranges adopted by the Judicial Department.
––-CLERKS OF COURT/SALARY INCREASE
Sec. 19.  G.S. 7A-101(a) reads as rewritten:
"(a)The clerk of superior court is a full-time employee of the State and shall receive an annual salary, payable in equal monthly installments, based on the population of the county, as determined by the population projections of the Office of State Budget and Management for the year preceding the first year of each biennial budget, according to the following schedule:
Population        	Annual Salary
	1989-90	1990-91
Less than 30,000	$ 38,472	40,392
30,000 to 99,999	44,256	46,464
100,000 to 199,999	50,016	52,512
200,000 and above	57,072	59,928

When a county changes from one population group to another, the salary of the clerk shall be changed to the salary appropriate for the new population group on July 1 of the first year of each biennial budget, except that the salary of an incumbent clerk shall not be decreased by any change in population group during his continuance in office."
––-ASSISTANT AND DEPUTY CLERKS OF COURT/SALARY INCREASE
Sec. 20.  G.S. 7A-102(c) reads as rewritten:
"(c)	Notwithstanding the provisions of subsection (a), the Administrative Officer of the Courts shall establish an incremental salary plan for assistant clerks and for deputy clerks based on a series of salary steps corresponding to the steps contained in the Salary Plan for State Employees adopted by the Office of State Personnel, subject to a minimum and a maximum annual salary as set forth below. On and after July 1, 1985, each assistant clerk and each deputy clerk shall be eligible for an annual step increase in his salary plan based on satisfactory job performance as determined by each clerk. Notwithstanding the foregoing, if an assistant or deputy clerk's years of service in the office of superior court clerk would warrant an annual salary greater than the salary first established under this section, that assistant or deputy clerk shall be eligible on and after July 1, 1984, for an annual step increase in his salary plan. Furthermore, on and after July 1, 1985, that assistant or deputy clerk shall be eligible for an increase of two steps in his salary plan, and shall remain eligible for a two-step increase each year as recommended by each clerk until that assistant or deputy clerk's annual salary corresponds to his number of years of service. A full-time assistant clerk or a full-time deputy clerk shall be paid an annual salary subject to the following minimum and maximum rates:
Assistant Clerks	Annual Salary
	1989-90	1990-91
Minimum	$ 19,536	20,508
Maximum	 32,772	34,416

Deputy Clerks	Annual Salary
				1989-90 	1990-91
Minimum	$ 15,312	16,080
Maximum	 25,128	26,388"
––-MAGISTRATES/SALARY INCREASE
Sec. 21.  G.S. 7A-171.1(a)(1) reads as rewritten:
"(1)	A full-time magistrate, so designated by the Administrative Officer of the Courts, shall be paid the annual salary indicated in the table below according to the number of years he has served as a magistrate. The salary steps shall take effect on the anniversary of the date the magistrate was originally appointed:
Table of Salaries of Full-Time Magistrates
Number of Prior Years of Service	Annual Salary
	1989-90	1990-91
Less than 1	$ 15,600	16,380
1 or more but less than 3	 16,416	17,232
3 or more but less than 5	 18,084	18,984
5 or more but less than 7	 19,920	20,916
7 or more but less than 9	 21,972	23,076
9 or more but less than 11	 24,204	25,416
11 or more	 26,628	27,960

A ‘Full-time magistrate' is a magistrate who is assigned to work an average of not less than 40 hours a week during his term of office.
Notwithstanding any other provision of this subdivision, a full-time magistrate, who was serving as a magistrate on December 31, 1978, and who was receiving an annual salary in excess of that which would ordinarily be allowed under the provisions of this subdivision, shall not have the salary, which he was receiving reduced during any subsequent term as a full-time magistrate. That magistrate's salary shall be fixed at the salary level from the table above which is nearest and higher than the latest annual salary he was receiving on December 31, 1978, and, thereafter, shall advance in accordance with the schedule in the table above."
––-CERTAIN EXECUTIVE BRANCH OFFICIALS/SALARY INCREASES
Sec. 22.  (a) The annual salaries, payable monthly, for the following fiscal years for the following executive branch officials are:
Executive Branch Officials	Annual Salary
	1989-90	1990-91
Chairman, Alcoholic Beverage Control
Commission	$ 68,304	71,724
Commissioner of Motor Vehicles	 68,304	71,724
Commissioner of Banks	 68,304	71,724
Deputy Banking Commissioner	 58,716	61,656
Chairman, Employment Security Commission	 68,304	71,724
State Personnel Director	 70,992	74,544
Chairman, Parole Commission	 62,328	65,448
Members of the Parole Commission	 57,504	60,384
Chairman, Industrial Commission	 61,320	64,392
Members of the Industrial Commission	 59,808	62,796
Executive Director, Agency for Public
Telecommunications	 57,504	60,384
Director, Seafood Industrial Park
Authority	 38,040	39,948
General Manager, Ports Railway
Commission	 51,876	54,468
Director, Museum of Art	 70,008	73,512
Director, State Ports Authority	 79,392	83,364
Executive Director, Wildlife Resources
Commission	 58,884	61,824
Executive Director, North Carolina
Housing Finance Agency	 84,648	88,884
Executive Director, North Carolina
Technological Development Authority	 45,156	47,412
Executive Director, North Carolina
Agricultural Finance Authority	 66,468	69,792
Director, Office of Administrative 
Hearings	 60,240	63,252
(b) Any person carrying on the functions of a position listed in subsection (a) of this section shall be paid only the salary set out in that subsection, and the mere classification of the position to be some other position does not allow the salary of that position to be set in some other manner.
––-ALL STATE-SUPPORTED PERSONNEL/SALARY INCREASES
Sec. 23.  (a)	Salaries for positions that are funded partially from the General Fund or Highway Fund and partially from sources other than the General Fund or Highway Fund shall be increased from the General Fund or Highway Fund appropriation only to the extent of the proportionate part of the salaries paid from the General Fund or Highway Fund.
(b)	The salary range maximums for all employees shall be increased to accommodate the across-the-board salary increase provided by this Part so that every employee will continue to have the same relative position with respect to salary increases and future increments as he would have had if these salary increases had not been made.
(c)	The salary increases provided in this Part to be effective July 1, 1989, do not apply to persons separated from State service due to resignation, dismissal, reduction in force, death, or retirement, whose last workday is prior to July 1, 1989.
(d)	Notwithstanding the provisions of Section 19.1 of Chapter 1137 of the 1979 Session Laws as amended by Chapter 1053 of the 1981 Session Laws, G.S. 115C-12(9)a., 115C-12(16), 126-7, or any other provision of law, no employee or officer of the public school system shall receive an automatic increment during the 1989-90 fiscal year, except as otherwise permitted by this act.
(e)  The Director of the Budget shall transfer from the salary increase reserve funds for fiscal year 1989-90 all funds necessary for the salary increases provided by this Part, including funds for the employer's retirement and Social Security contributions.
(f)  Nothing in this Part authorizes the transfer of funds from the General Fund to the Highway Fund for salary increases.
PART IV.
Sales Tax Changes.
Sec. 24.  G.S. 105-164.3 is amended by adding a new subdivision after subdivision (5) to read:
"(5a)	The term 'food for human consumption' means food purchased for preparation or consumption off the premises of the seller.  The term includes the following:
a.	Food products packaged by the manufacturer thereof in the usual and customary container used for the particular type of food product and delivered intact in the container by the retailer to the purchaser for consumption off the premises of the retailer.
b.	Basic food items such as fruit, vegetables, meat, dairy and poultry products, cereals, and bread and other bakery products; and other food and food products to be used in the home except those excluded in this subsection.
c.	Prepared meals or foods sold by grocery stores, supermarkets, or any other similar business unless the business provides facilities for the customers to consume the meals or foods on the premises, in which case such meals or foods sold for consumption on the premises are taxable.
d.	Prepared meals served in a boarding house, if the meals are served only to permanent roomers of the boarding house and the charge for the meals is included in the weekly or monthly charge for the room of each boarder.
e.	Coffee and other foods that are sold either through vending machines located at places that have no facilities for serving prepared meals or foods or at filling stations, service stations, garages, or other similar businesses that have no facilities for serving prepared meals or foods.
The term does not include:
a.	Alcoholic beverages as defined in G.S. 105-113.68, dry or liquid cocktail mixes, and soft drinks, soft drink powders, and syrups subject to the soft drink tax under Article 2B of Chapter 105.
b.	Candy and other confectionaries, chewing gum, popped corn wherever sold, and all preparations sold as dietary supplements.
c.	Prepared meals or foods sold and served on or off the premises by restaurants, cafes, cafeterias, delicatessens, drug stores, concession stands, 'fast-food' businesses that sell prepared meals or foods on a 'take-out' basis, and any other establishment or enterprise, mobile or otherwise, that maintains facilities, equipment, services, or inventory for the sale of meals, snacks, sandwiches, and other prepared food to customers.  Prepared meals furnished to employees in any of these places as part of their compensation are not taxable."
Sec. 25.  G.S. 105-164.4 reads as rewritten:
"§ 105-164.4.  Imposition of tax; retailer.
There is hereby levied and imposed, in addition to all other taxes of every kind now imposed by law, a privilege or license tax upon every person who engages in the business of selling tangible personal property at retail, renting or furnishing tangible personal property or the renting and furnishing of rooms, lodgings and accommodations to transients, in this State, the same to be collected and the amount to be determined by the application of the following rates against gross sales and rentals, to wit:
(1)	At the rate of four percent (4%) of the sales price of each item or article of tangible property when sold at retail in this State, the tax to be computed on total net taxable sales as defined herein but for the purpose of computing the amount due the State each and every taxable retail sale, or retail sales upon which the tax has been collected, or the amount of tax actually collected, whichever be greater and whether or not erroneously collected, shall be included in the computation of tax due the State. Provided, however, that in the case of the sale of any aircraft, railway locomotive, railway car or the sale of any motor vehicle or boat, the tax shall be only at the rate of two percent (2%) of the sales price, but at no time shall the maximum tax with respect to any one such aircraft, railway locomotive, railway car or motor vehicle or boat, including all accessories attached thereto at the time of delivery thereof to the purchaser, be in excess of three hundred dollars ($300.00).
		The separate sale of a new motor vehicle chassis and a new motor vehicle body to be installed thereon, whether by the same retailer or by different retailers shall be subject only to the tax herein prescribed with respect to a single motor vehicle. No tax shall be imposed upon a body mounted on the chassis of a motor vehicle which temporarily enters the State for the purpose of having such body mounted thereon by the manufacturer thereof.
		Notwithstanding G.S. 105-164.3(16) and regardless whether the seller is a retailer of motor vehicles, the sales price of a motor vehicle is the gross sales price of the motor vehicle less any allowance given for a motor vehicle taken in trade as part of the consideration for the purchased motor vehicle.
		The tax levied under this section applies to all retail sales of motor vehicles regardless whether the seller is engaged in business as a retailer of motor vehicles or whether a tax on the sale of the vehicle has previously been  paid under this Article. A purchaser of a motor vehicle from a retailer shall pay the tax imposed under this Article to the retailer, who is liable for collecting and remitting the tax to the Secretary. A purchaser of a motor vehicle is liable for payment of the tax imposed by this Article if the seller is not a retailer. The purchaser shall pay the tax to the Commissioner of Motor Vehicles when applying for a certificate of title for the vehicle. When property is transferred by an individual to a partnership or corporation, and no gain or loss arises as provided by Section 351 or Section 721 of the Code, such transfer is not a sale for the purpose of this subdivision if the transfer is incident to the organization of the partnership or corporation.
		When applying for a certificate of title, a purchaser of a motor vehicle from a seller who is not a retailer shall certify in writing the sales price of the purchased motor vehicle. A purchaser who knowingly makes a false certification of the sales price is guilty of a misdemeanor.
		The Commissioner of Motor Vehicles may not issue a certificate of title for a motor vehicle sold by a seller who is not a retailer unless the tax imposed by this section is paid when the purchaser of the vehicle applies for a certificate of title. The Commissioner shall remit taxes collected by him under this subsection to the Secretary.
		Persons who lease or rent motor vehicles shall collect and remit the tax imposed by this Article on the separate retail sale of a motor vehicle in addition to the tax imposed on the proceeds from the lease or rental of the motor vehicle.
		Provided further, the tax shall be only at the rate of one percent (1%) of the sales price on the following items:
a1.	Food for human consumption, as defined in G.S. 105-164, but not including food otherwise exempt from tax as provided in this Article.
a2.	Medicines intended for internal or external use in the cure, mitigation, treatment, or prevention of disease in human beings, but not including medicines otherwise exempt from tax as provided in this Article, or cosmetics or toilet articles notwithstanding the presence of medicinal ingredients.
a3.	Horses or mules by whomsoever sold.
	b.	Semen to be used in the artificial insemination of animals.
c.	Sales of fuel, other than electricity or piped natural gas, to farmers to be used by them for any farm purposes other than preparing food, heating dwellings and other household purposes. The quantity of fuel purchased or used at any one time shall not in any manner be a determinative factor as to whether any sale or use of fuel is or is not subject to the one percent (1%) rate of tax imposed herein.
	d.	Sales of fuel, other than electricity or piped natural gas, to manufacturing industries and manufacturing plants for use in connection with the operation of such industries and plants other than sales of fuels to be used for residential heating purposes. The quantity of fuel purchased or used at any one time shall not in any manner be a determinative factor as to whether any sale or use of fuel is or is not subject to the one percent (1%) rate of tax imposed herein.
	e.	Sales of fuel, other than electricity or piped natural gas, to commercial laundries or to pressing and dry-cleaning establishments for use in machinery used in the direct performance of the laundering or the pressing and  cleaning service.
	f.	Sales to freezer locker plants of wrapping paper, cartons and supplies consumed directly in the operation of such plant.
		Provided further, the tax shall be only at the rate of one percent (1%) of the sales price, subject to a maximum tax of eighty dollars ($80.00) per article, on the following items:
	g.	Sales of machines and machinery, whether animal or motor drawn or operated, and parts and accessories for such machines and machinery to farmers for use by them in the planting, cultivating, harvesting or curing of farm crops, and sales of machines and machinery and parts and accessories for such machines and machinery to dairy operators, poultry farmers, egg producers, and livestock farmers for use by them in the production of dairy products, poultry, eggs or livestock, except such machines, machinery, equipment, parts, and accessories that come within the provisions of G.S. 105-164.13(4c).
		The term ‘machines and machinery' as used in this subdivision is defined as follows:
		The term shall include all vehicular implements, designed and sold for any use defined in this subdivision, which are operated, drawn or propelled by motor or animal power, but shall not include vehicular implements which are operated wholly by hand, and shall not include any motor vehicles required to be registered under Chapter 20 of the General Statutes.
		The term shall include all nonvehicular implements and mechanical devices designed and sold for any use defined in this subdivision, which have moving parts, or which require the use of any motor or animal power, fuel, or electricity in their operation but shall not include nonvehicular implements which have no moving parts and are operated wholly by hand.
		The term shall also include metal flues sold for use in curing tobacco, whether such flues are attached to handfired furnaces or used in connection with mechanical burners.
	h.	Sales of mill machinery or mill machinery parts and accessories to manufacturing industries and plants, and sales to contractors and subcontractors purchasing mill machinery or mill machinery parts and accessories for use by them in the performance of contracts with manufacturing industries and plants, and sales to subcontractors purchasing mill machinery or mill machinery parts and accessories for use by them in the performance of contracts with general contractors who have contracts with manufacturing industries and plants. As used in this paragraph, the term "manufacturing industries and plants”does not include delicatessens, cafes, cafeterias, restaurants, and other similar retailers that are principally engaged in the retail sale of foods prepared by them for consumption on or off their premises.
	i.	Sales of central office equipment and switchboard and private branch exchange equipment to telephone companies regularly engaged in providing telephone service to subscribers on a commercial basis, and sales to these companies of prewritten computer programs used in providing telephone service to their subscribers.
	j.	Sales to commercial laundries or to pressing and dry cleaning establishments of machinery used in the direct performance of the laundering or the pressing and cleaning service and of parts and accessories thereto.
		k.	Sales to freezer locker plants of machinery used in the direct operation of said freezer locker plant and of parts and accessories thereto.
	l.	Sales of broadcasting equipment and parts and accessories thereto and towers to commercial radio and television companies which are under the regulation and supervision of the Federal Communications Commission.
	m.	Sales to farmers of bulk tobacco barns and racks and all parts and accessories thereto and similar apparatus used for the curing and drying of any farm produce.
	n.	Repealed by Session Laws 1987, c. 800, s. 2.
		o.	Sales to farmers of grain, feed or soybean storage facilities and accessories thereto, whether or not dryers are attached, and all similar apparatus and accessories thereto for the storage of grain, feed or soybeans.
		p.	Repealed by Session Laws 1983, c. 805, s. 2, effective July 1, 1983.
		q.	Sales of containers to farmers or producers for use in the planting, producing, harvesting, curing, marketing, packaging, sale, or transporting or delivery of their products when such containers do not go with and become part of the sale of their products at wholesale or retail.
(2)	At the rate of four percent (4%) of the gross proceeds derived from the lease or rental of tangible personal property as defined herein, where the lease or rental of such property is an established business, or the same is incidental or germane to said business; except that whenever a rate of less than four percent (4%) is applicable to a sale of property which is leased or rented, the lower rate of tax shall be due on such lease or rental proceeds.
(3)	Operators of hotels, motels, tourist homes, tourist camps, and similar type businesses and persons who rent private residences and cottages to transients are considered retailers under this Article.  There is levied upon every such retailer a tax of four percent (4%) of the gross receipts derived from the rental of any room or rooms, lodgings, or accommodations furnished to transients for a consideration.  This tax does not apply to any private residence or cottage that is rented for less than 15 days in a calendar year or to any room, lodging, or accommodation supplied to the same person for a period of 90 or more continuous days.
As used in this subdivision, the term ‘persons who rent to transients' means (i)	owners of private residences and cottages who rent to transients and (ii) rental agents, including ‘real estate brokers' as defined in G.S. 93A-2, who rent private residences and cottages to transients on behalf of the owners.  If a rental agent is liable for the tax imposed by this subdivision, the owner is not liable.
(4)	Every person, firm or corporation engaged in the business of operating a pressing club, cleaning plant, hat-blocking establishment, dry-cleaning plant, laundry (including wet or damp wash laundries and businesses known as launderettes and launderalls), or any similar-type business, or engaged in the business of renting clean linen or towels or wearing apparel, or any similar-type business, or engaged  in the business of soliciting cleaning, pressing, hat blocking, laundering or rental business for any of the aforenamed businesses, shall be considered "retailers”for the purposes of this Article. There is hereby levied upon every such person, firm or corporation a tax of four percent (4%) of the gross receipts derived from services rendered in  engaging in any of the occupations or businesses named in this subdivision, and every person, firm or corporation subject to the provisions of this subdivision shall register and secure a license in the manner hereinafter provided in this section, and, insofar as practicable, all other provisions of this Article shall be applicable with respect to the tax herein provided for. The tax imposed by this subdivision does not apply to receipts derived from coin or token-operated washing machines, extractors, and dryers.  The taxes levied in this subdivision are additional privilege or license taxes for the privilege of engaging in the occupations or businesses named herein. Any person, firm or corporation engaged in cleaning, pressing, hat blocking, laundering for, or supplying clean linen or towels or wearing apparel to, another person, firm or corporation engaged in soliciting shall not be required to pay the four percent (4%) tax on its gross receipts derived through such solicitor, if the soliciting person, firm or corporation has registered with the Department, secured the license hereinafter required and has paid the tax at the rate of four percent (4%) of the total gross receipts derived from business solicited.
(4a)	At the rate of four percent (4%) of the gross receipts derived by a utility from sales of electricity, piped natural gas, or local telecommunications service as defined by G.S. 105-120(a). A person who operates a utility is considered a retailer under this Article.
(4b)	A person who sells tangible personal property at a flea market, other than his own household personal property, is considered a retailer under this Article.  A tax is levied on that person at the rate of four percent (4%) of the sales price of each article sold by him at the flea market.  A person who leases or rents space at a flea market may not lease or rent this space unless the retailer requesting to rent or lease the space furnishes evidence that he has obtained the license required by this Article.  A person who leases or rents space at a flea market shall keep records of retailers to whom he has leased or rented space at the market.  As used in this subdivision, the term ‘flea market' means a place where space is rented to a person for the purpose of selling tangible personal property.
(4c)	At the rate of seven and one-half percent (7 1/2%) of the gross receipts derived from providing toll telecommunications services or private telecommunications services as defined by G.S. 105-120(a) that both originate from and terminate in the State which are not subject to the privilege tax under G.S. 105-120.  Any business entity that provides the service outlined above is considered a retailer under this Article.  This subdivision shall not apply to telephone membership corporations as described in Chapter 117 of the General Statutes.
(5)	The said tax shall be collected from the retailer as defined herein and paid by him at the time and in the manner as hereinafter provided. Provided, however, that any person engaging or continuing in business as a retailer shall pay the tax required on the net taxable sales of such business at the rates specified when proper books are kept showing separately the gross proceeds of taxable and nontaxable sales of tangible personal property in such form as may be accurately and conveniently checked by the Secretary or his duly authorized agent. If such records are not kept separately the tax shall be paid as a retailer on the gross sales of business and the exemptions and exclusions provided by this Article shall not be allowed.
(6)	The tax so levied is and shall be in addition to all other taxes whether levied in the form of excise, license or privilege or other taxes.
(7)	Any person who shall engage or continue in any business for  which a privilege tax is imposed by this Article shall immediately after July 1, 1979, apply for and obtain from the Secretary upon payment of the sum of five dollars ($5.00) a license to engage in and conduct such business upon the condition that such person shall pay the tax accruing to the  State of North Carolina under the provisions of this Article  and he shall thereby be duly licensed and registered to engage in and conduct such business. Except as hereinafter provided, a license issued under this subsection shall be a continuing license until revoked for failure to comply with the provisions of this Article. However, any person who has heretofore applied for and obtained such license, and such license was in force and effect as of July 1, 1979, shall not be required to apply for and obtain a new license.
		Any person who shall cease to be engaged in any business for which a privilege tax is imposed by this Article, and who shall remain continuously out of business for a period of five years shall apply for and obtain a new license from the  Secretary upon the payment of a tax of five dollars ($5.00),  and any license previously issued under this section shall be null, void and of no effect. The burden of proof after such period shall be upon the taxpayer to show that he did engage in such activity within the period, and that no new license is required.
		A retailer who sells tangible personal property at a flea market shall conspicuously display his sales tax license when making sales at the flea market."
Sec. 26.  105-164.6(1), (2), and (3) read as rewritten:
"(1)	At the rate of four percent (4%) of the cost price of each item or article of tangible personal property when the same is not sold but used, consumed, distributed or stored for use or consumption in this State; except that, whenever a rate of less than four percent (4%) is applicable under the sales tax schedule set out in G.S. 105-164.4 to the sale at retail of an item or article of tangible personal property, the same rate, and maximum tax if any, shall be used in computing any use tax due under this subdivision.  The separate sale of a new motor vehicle chassis and a new motor vehicle body to be installed thereon, whether by the same retailer or by different retailers, shall be subject only to the tax herein prescribed with respect to a single motor vehicle.
(2)	At the rate of four percent (4%) of the monthly lease or rental price paid by the lessee or rentee, or contracted or agreed to be paid by the lessee or rentee, to the owner of the tangible personal property; except that, whenever a rate of less than four percent (4%) is applicable under the sales tax schedule set out in G.S. 105-164.4 to the sale at retail of an item or article of tangible personal property, then the same rate, and maximum tax if any, shall be used in computing any use tax due under this subdivision.
(3)	There is hereby levied and there shall be collected from every person, firm, or corporation, an excise tax of four percent (4%) of the purchase price of all tangible personal property purchased or used which shall enter into or become a part of any building or other kind of structure in this State, including all materials, supplies, fixtures and equipment of every kind and description which shall be annexed thereto or in any manner become a part thereof.  Said tax shall be levied against the purchaser of such property.  Provided, that where the purchaser is a contractor, the contractor and owner shall be jointly and severally liable for said tax, but the liability of the owner shall be deemed satisfied if before final settlement between them the contractor furnishes to the owner an affidavit certifying that said tax has been paid.  Provided further, that where the purchaser is a subcontractor, the contractor and subcontractor shall be jointly and severally liable for said tax, but the liability of the contractor shall be deemed satisfied if before final settlement between them the subcontractor furnishes to the contractor an affidavit certifying that said tax has been paid."
Sec. 27.  G.S. 105-164.10 reads as rewritten:
"§ 105-164.10.  Retail bracket system.
For the convenience of the retailer in collecting the tax due at the rate of four percent (4%) and to facilitate the administration of this Article, every retailer engaged in or continuing within this State in a business for which a license, privilege or excise tax is required by this Article shall add to the sale price and collect from the purchaser on all taxable retail sales an amount equal to the following:
						 (1)	No amount on sales of less than 10¢;
(2)	 1¢ on sales of 10¢ through 29¢;
(3)	 2¢ on sales of 30¢ through 59¢;
(4)	 3¢ on sales of 60¢ through 84¢;
(5)	 4¢ on sales of 85¢ through $1.12; and
(6)	 Sales of over $1.12–straight four percent (4%) with
major fractions governing.
Use of the above bracket does not relieve the retailer from the duty and liability to remit to the Secretary an amount equal to four percent (4%) of the gross receipts derived from all taxable retail sales subject to the four percent (4%) rate during the taxable period.
Whenever a sales or use tax is due at a rate of less than four percent (4%), the tax shall be computed by multiplying the sales or purchase price by the applicable rate and by rounding the result off to the nearest whole cent. The use of this method in computing the sales or use tax shall not relieve a taxpayer from the duty and liability of remitting to the Secretary an amount equal to the applicable rates times gross receipts subject to taxation at the lesser rates."
Sec. 28.  G.S. 105-164.13 (18) reads as rewritten:
"(18)	Funeral expenses, including coffins and caskets, not to exceed one thousand five hundred dollars ($1,500).  All other funeral expenses, including gross receipts for services rendered, shall be taxable at the rate of four percent (4%).  However, ‘services rendered' shall not include those services which have been taxed pursuant to G.S. 105-164.4(4), or those services performed by any beautician, cosmetologist, hairdresser or barber employed by or at the specific direction of the family or personal representative of a deceased; and ‘funeral expenses' and ‘services rendered' shall not include death certificates procured by or at the specific direction of the family or personal representative of a deceased.  Where coffins, caskets or vaults are purchased direct and a separate charge is paid for services, the provisions of this subdivision shall apply to the total for both."
Sec. 29.  Effective July 1, 1990, G.S. 105-164.16(c) reads as rewritten:
	"(c) Sales Tax on Utility Services. – Taxes levied under G.S. 105-164.4(4a) and G.S. 105-164.4(4c) are due and payable monthly on or before the 30th day following the end of the calendar month in which the tax accrues."
Sec. 30.  G.S. 105-465 reads as rewritten:
"§ 105-465. County election as to adoption of local sales and use tax.
The board of elections of any county, upon the written request of the board of county commissioners thereof, or upon receipt of a petition signed by qualified voters of the county equal in number to at least fifteen percent (15%) of the total number of votes cast in the county, at the last preceding election for the office of Governor, shall call a special election for the purpose of submitting to the voters of the county the question of whether a one percent (1%) sales and use tax as hereinafter provided will be levied.
The special election shall be held under the same rules and regulations applicable to the election of members of the General Assembly.  No new registration of voters shall be required. All qualified voters in the county who are properly registered not later than 21 days (excluding Saturdays and Sundays) prior to the election shall be entitled to vote at said election.  The county board of elections shall give at least 20 days' public notice prior to the closing of the registration books for the special election.
The county board of election shall prepare ballots for the special election which shall contain the words, "FOR the one percent (1%) local sales and use tax only on those items presently covered by the four percent (4%) sales and use ”tax and on food and medicine covered by the one percent (1%) State sales and use tax.”and the words, "AGAINST the one percent (1%) local sales and use tax only on those items presently covered by the four percent (4%) sales and use ”tax and on food and medicine covered by the one percent (1%) State sales and use tax.”with appropriate squares so that each voter may designate his vote by his cross (X) mark.
The county board of elections shall fix the date of the special election; provided, however, that the special election shall not be held on the date of any biennial election for county officers, nor within 60 days thereof, nor within one year from the date of the last  preceding special election under this section."
Sec. 31.  G.S. 105-467 reads as rewritten:
"§ 105-467.  Sales tax imposed; limited to items on which the State now imposes a four percent sales tax.
The sales tax which may be imposed under this Article is limited to a tax at the rate of one percent (1%) of:
(1)	The sales price of those articles of tangible personal property now subject to the four percent (4%) sales tax imposed by the State under G.S. 105-164.4(1);
(2)	The gross receipts derived from the lease or rental of tangible personal property where the lease or rental of such  property is an established business now subject to the four percent (4%) sales tax imposed by the State under G.S. 105-164.4(2);
(3)	The gross receipts derived from the rental of any room or lodging furnished by any hotel, motel, inn, tourist camp or other similar accommodations now subject to the four percent (4%) sales tax imposed by the State under G.S. 105-164.4(3); and
(4)	The gross receipts derived from services rendered by laundries, dry cleaners, cleaning plants and similar type businesses now subject to the four percent (4%) sales tax imposed by the State under G.S. 105-164.4(4).
The sales tax authorized by this Article does not apply to sales by a utility of electricity, piped natural gas, local, toll, or private telecommunications services as defined by G.S. 105-120(a).
The exemptions and exclusions contained in G.S. 105-164.13 and the refund provisions contained in G.S. 105-164.14 shall apply with equal force and in like manner to the local sales and use tax authorized to be levied and imposed under this Article.  A taxing county shall have no authority, with respect to the local sales and use tax imposed under this Article to change, alter, add to or delete any refund provisions contained in G.S. 105-164.14, or any exemptions  or exclusions contained in G.S. 105-164.13 or which are elsewhere provided for.
The local sales tax authorized to be imposed and levied under the  provisions of this Article shall be applicable to such retail sales, leases, rentals, rendering of services, furnishing of rooms, lodgings or accommodations and other taxable transactions which are made, furnished or rendered by retailers whose place of business is located  within the taxing county.  The tax imposed shall apply to the furnishing of rooms, lodging or other accommodations within the county which are rented to transients.  For the purpose of this Article, the situs of a transaction is the location of the retailer's place of business."
Sec. 32.  G.S. 105-468 reads as rewritten:
"§ 105-468. Use tax imposed; limited to items upon which the State now imposes a four percent use tax.
The use tax which may be imposed under this Article shall be at the rate of one percent (1%) of the cost price of each item or article of tangible personal property when the same is not sold but used, consumed or stored for use or consumption in the taxing county, except that no tax shall be imposed upon such tangible personal property when, if the property were subject to the use tax imposed by G.S. 105-164.6, such property would be taxed by the State of North Carolina at a rate less than four percent (4%).
Every retailer engaged in business in this State and in the taxing county and required to collect the use tax levied by G.S. 105-164.6 shall also collect the one percent (1%) use tax when such property is to be used, consumed or stored in the taxing county, said one percent (1%) use tax to be collected concurrently with the State's use tax; but no retailer not required to collect the use tax levied by G.S. 105-164.6 shall be required to collect the one percent (1%) use tax.  The use tax contemplated by this section shall be levied against the purchaser, and his liability for such use tax shall be extinguished only upon his payment of the use tax to the retailer, where the retailer is required to collect the tax, or to the Secretary of Revenue, or to the taxing county, as appropriate, where the retailer is not required to collect the tax.
Where a local sales or use tax has been paid with respect to said tangible personal property by the purchaser thereof, either in another taxing county within the State, or in a taxing jurisdiction outside the State where the purpose of the tax is similar in purpose and intent to the tax which may be imposed pursuant to this Article, said tax may be credited against the tax imposed under this section by a taxing county upon the same property.  If the amount of sales or use tax so paid is less than the amount of the use tax due the taxing county under this section, the purchaser shall pay to the Secretary of Revenue or to the taxing county, as appropriate, an amount equal to the difference between the amount so paid in the other taxing county or jurisdiction and the amount due in the taxing county hereunder.  The Secretary of Revenue or the taxing county, as appropriate, may require such proof of payment in another taxing county or jurisdiction as is deemed to be necessary and proper.  The use tax levied hereunder shall not be subject to credit for payment of any State sales or use tax not imposed for the benefit and use of counties and municipalities.  No credit shall be given under this section for sales or use taxes paid in a taxing jurisdiction outside this State if that taxing jurisdiction does not grant similar credit for sales taxes paid under this Article."
Sec. 33.  Article 39 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-468.2.  Local sales and use tax on food and nonprescription medicines.
Notwithstanding the provisions of G.S. 105-467 and G.S. 105-468, the sales and use tax that may be imposed under this Article applies to food for human consumption and to nonprescription drugs and medicines taxed by the State at the rate of one percent (1%) pursuant to G.S. 105-164.4.  The tax does not apply, however, to food or medicines exempted from State tax in G.S. 105-164.13."
Sec. 34.  G.S. 105-470 reads as rewritten:
"§ 105-470. Retail bracket system; application to local sales and use tax.
For the convenience of the retailer in collecting the State sales or use tax due at the rate of four percent (4%) and the local sales or use tax due at the rate of one percent (1%), and to facilitate the administration of this Article, every retailer engaged in or continuing in business in any county wherein the tax imposed and levied herein shall be applicable, is required by this Article to add to the sales price and collect from the purchaser on all taxable sales other than sales of food and medicine subject to the State tax at the rate of one percent (1%) an amount equal to the following:
	 (1)	No amount on sales of less than 9¢;
(2)	1¢ on sales of 9¢ through 23¢;
(3)	2¢ on sales of 24¢ through 48¢;
(4)	3¢ on sales of 49¢ through 67¢;
(5)	4¢ on sales of 68¢ through 85¢;
(6)	5¢ on sales of 86¢ through $1.09; and
(7)	Sales of over $1.09–straight five percent (5%) with
major fractions governing.
The use of the bracket system, set out above, shall not relieve the retailer from the duty and liability of collecting and remitting to the Secretary of Revenue, or to a taxing county, as appropriate, an amount equal to the tax imposed by the taxing county under this Article.
The following bracket applies to collections by retailers on sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies the local sales and use tax under this Article:
(1)	No amount on sales of less than 15¢.
(2)	1¢ on sales of 15¢ and over but not in excess of 56¢.
(3)	2¢ on sales of 57¢ and over but not in excess of $1.24.
(4)	Sales over $1.24 – straight two percent (2%) with
major fractions governing."
Sec. 35.  G.S. 105-485 reads as rewritten:
"§ 105-485. Retail collection bracket.
The following bracket applies to collections by retailers on sales other than sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies additional sales and use taxes under this Article:
						 	(1)	No amount on sales of less than 9¢;
(2)	 1¢ on sales of 9¢ through 21¢;
(3)	 2¢ on sales of 22¢ through 43¢;
(4)	 3¢ on sales of 44¢ through 61¢;
(5)	 4¢ on sales of 62¢ through 78¢;
(6)	 5¢ on sales of 79¢ through 96¢;
(7)	 6¢ on sales of 97¢ through $1.18; and
(8)	 Sales of over $1.18–straight five and one-half
percent (5-1/2%) with major fractions governing.
The following bracket applies to collections by retailers on sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies additional sales and use taxes under this Article:
(1)	No amount on sales of less than 12¢.
(2)	1¢ on sales of 12¢ and over but not in excess of 45¢.
(3)	2¢ on sales of 46¢ and over but not in excess of 91¢.
(4)	3¢ on sales of 92¢ and over but not in excess of $1.39.
(5)	Sales over $1.39 – straight two and one-half percent
(2-1/2%) with major fractions governing."
Sec. 36.  G.S. 105-492 reads as rewritten:
"§ 105-492. Retail collection bracket.
The following bracket applies to collections by retailers on sales other than sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies sales and use taxes under this Article:
						(1)	No amount on sales of less than 10¢;
(2)	 1¢ on sales of 10¢ through 25¢;
(3)	 2¢ on sales of 26¢ through 53¢;
(4)	 3¢ on sales of 54¢ through 75¢;
(5)	 4¢ on sales of 76¢ through 95¢;
(6)	 5¢ on sales of 96¢ through $1.22; and
(7)	 Sales of over $1.22–straight four and one-half
percent (4-1/2%) with major fractions governing.
The following bracket applies to collections by retailers on sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies sales and use taxes under this Article:
(1)	No amount on sales of less than 20¢.
(2)	1¢ on sales of 20¢ and over but not in excess of 75¢.
(3)	2¢ on sales of 76¢ and over but not in excess of $1.66.
(4)	Sales over $1.66 – straight one and one-half percent
(1-1/2%) with major fractions governing."
Sec. 37.  G.S. 105-500 reads as rewritten:
"§ 105-500. Retail collection bracket.
The following bracket applies to collections by retailers on sales other than sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies additional sales and use taxes under this Article:
						 	(1)	No amount on sales of less than 9¢;
(2)	 1¢ on sales of 9¢ through 19¢;
(3)	 2¢ on sales of 20¢ through 39¢;
(4)	 3¢ on sales of 40¢ through 56¢;
(5)	 4¢ on sales of 57¢ through 71¢;
(6)	 5¢ on sales of 72¢ through 88¢;
(7)	 6¢ on sales of 89¢ through $1.08; and
(8)	 Sales of over $1.08–straight six percent
(6%) with major fractions governing.
The following bracket applies to collections by retailers on sales of food and medicine subject to the State tax at the rate of one percent (1%) in a county that levies additional sales and use taxes under this Article:
(1)	No amount on sales of less than 10¢.
(2)	1¢ on sales of 10¢ and over but not in excess of 35¢.
(3)	2¢ on sales of 36¢ and over but not in excess of 70¢.
(4)	3¢ on sales of 71¢ and over but not in excess of $1.16.
(5)	Sales of over $1.16 – straight three percent
(3%) with major fractions governing."
Sec. 38.  Chapter 1096 of the 1967 Session Laws, as amended, is further amended as follows:
(1) By deleting the phrases "THREE PER CENT", "three per cent (3%)", "Three Per Cent (3%)", "Three Percent (3%)", and "three percent (3%)”wherever they appear and substituting the phrase "FOUR PERCENT (4%)", "four percent (4%)", or "Four Percent (4%)", as appropriate;
(2) By adding a new section to read:
“Sec. 5A.  Local sales and use tax on food and nonprescription medicines.
Notwithstanding the provisions of Sections 4 and 5 of this act, the sales tax and use tax that may be imposed under this act applies to food for human consumption and to nonprescription drugs and medicines taxed by the State at the rate of one percent (1%) pursuant to G.S. 105-164.4.  The tax does not apply, however, to food or medicines exempted from State tax in G.S. 105-164.13."; and
(3) By deleting the tax table at the end of the first paragraph of Section 7 and substituting the following:
"(1)	No amount on sales of less than 9¢;
(2)	 1¢ on sales of 9¢ through 23¢;
(3)	 2¢ on sales of 24¢ through 48¢;
(4)	 3¢ on sales of 49¢ through 67¢;
(5)	 4¢ on sales of 68¢ through 85¢;
(6)	 5¢ on sales of 86¢ through $1.09; and
(7)	 Sales of over $1.09–straight five percent (5%) with
major fractions governing.
Provided, however, that the following bracket applies to collections by retailers on sales of food and medicine subject to the State tax at the rate of one percent (1%):
(1)	No amount on sales of less than 10¢.
(2)	1¢ on sales of 10¢ and over but not in excess of 35¢.
(3)	2¢ on sales of 36¢ and over but not in excess of 70¢.
(4)	3¢ on sales of 71¢ and over but not in excess of $1.16.
(5)	Sales of over $1.16 – straight three percent
(3%) with major fractions governing."
Sec. 39.  (a)	Approval under the Local Government Sales and Use Tax Act, Article 39 of Chapter 105 of the General Statutes, or under the Mecklenburg County Sales and Use Tax Act, Chapter 1096 of the 1967 Session Laws, as amended, of one percent (1%) local sales and use taxes in addition to the three percent (3%) State sales and use taxes constitutes approval of one percent (1%) local sales and use taxes in addition to the four percent (4%) State sales and use taxes and the one percent (1%) State sales and use taxes on food for human consumption and nonprescription medicines.
(b)	Approval under the Supplemental Local Government Sales and Use Tax Act, Article 40 of Chapter 105 of the General Statutes, of one-half percent (1/2%) local sales and use taxes in addition to the one percent (1%) local sales and use taxes and three percent (3%) State sales and use taxes constitutes approval of one-half percent (1/2%) local sales and use taxes in addition to the one percent (1%) local sales and use taxes and the four percent (4%) State sales and use taxes and the one percent (1%) State sales and use taxes on food for human consumption and nonprescription medicines.
(c)	Approval under the Alternative Local Government Sales and Use Tax Act, Article 41 of Chapter 105 of the General Statutes, of one-half percent (1/2%) local sales and use taxes in addition to the three percent (3%) State sales and use taxes constitutes approval of one-half percent (1/2%) local sales and use taxes in addition to the four percent (4%) State sales and use taxes and the one percent (1%) State sales and use taxes on food for human consumption and nonprescription medicines.
(d)	Approval under the Additional Supplemental Local Government Sales and Use Tax Act, Article 42 of Chapter 105 of the General Statutes, of one-half percent (1/2%) local sales and use taxes in addition to the one and one-half percent (1-1/2%) local sales and use taxes and three percent (3%) State sales and use taxes constitutes approval of one-half percent (1/2%) local sales and use taxes in addition to the one and one-half percent (1-1/2%) local sales and use taxes and the four percent (4%) State sales and use taxes and the one percent (1%) State sales and use taxes on food for human consumption and nonprescription medicines.
PART V.
Franchise Tax Changes.
Sec. 40.  Effective July 1, 1990, G.S. 105-116 reads as rewritten:
"§ 105-116. Franchise or privilege tax on electric light, power, gas, water, sewerage, and other similar public service companies not otherwise taxed.
(a)	Every person, firm or corporation, domestic or foreign, other than municipal corporations, engaged in the business of furnishing electricity, electric lights, current, power or piped gas, or owning and/or operating a water system subject to regulation by the North Carolina Utilities Commission, or owning and/or operating a public sewerage system shall, within 30 days after the first day of each month make and deliver to the Secretary of Revenue, upon such forms and blanks as required by him, a report verified by the affirmation of the officer or authorized agent making such report and statement, containing the following information:
(1)	The total gross receipts for the month immediately preceding such return from such business within and without this State.
(2)	The total gross receipts for the same period from such business within this State.
(3)	The total gross receipts from the commodities or services described in this section sold to a vendee subject to the tax levied by this section or to a joint agency established under Chapter 159B of the General Statutes or a municipality having an ownership share in a project established under that Chapter.
(4)	The total amount and price paid for such commodities or services purchased from others engaged in the above-named business in this State, and the name or names of the vendor.
(5)	As to gas companies, the gross receipts derived from sales of piped gas to manufacturers which is to be used as an ingredient or component of a manufactured product.
Gross receipts shall be reported on an accrual basis.
(b)	From the total gross receipts within this State there shall be deducted the gross receipts reported in subsection (a)(3) of this section.
(c)	An annual franchise or privilege tax at the rates specified in this subsection is levied on the businesses listed in subsection (a).  This tax is for the privilege of engaging in business in this State and is due and payable monthly to the Secretary of Revenue when the report required by subsection (a) is filed. The tax on a public sewerage company is at the rate of six percent (6%) of the total gross receipts of the company derived within the State. The tax on an electric power company or a gas company is at the rate of three and twenty-two hundredths percent (3.22%) of the total gross receipts derived within the State. The tax on water companies is at the rate of four percent (4%) of the total gross receipts derived within the State. All deductions allowed by this section shall first be subtracted from total gross receipts to determine the total taxable gross receipts.
The tax imposed by this section does not apply to special charges collected within this State by natural gas utilities pursuant to drilling and exploration surcharges approved by the Utilities Commission, where such surcharges are segregated from the other receipts of the natural gas utility and are devoted to drilling, exploration and other means to acquire additional supplies of natural gas for the account of natural gas customers in North Carolina and where the beneficial interest in said surcharge collections is preserved for the natural gas customers paying said surcharges under rules established by the Utilities Commission.
In determining the total tax payable by any company under this section, there shall be allowed as a credit on such tax the amount of the credit authorized by Division V of Article 4 of this Chapter.
(d)	Repealed by Session Laws 1973, c. 1287, s. 3.
(e)	The report herein required of gross receipts within and without the State, shall include the total gross receipts for the period stated of all properties owned and operated by the reporting person, firm, or corporation on the first day of each calendar month, whether operated by it for the previous annual period, or whether intermediately acquired by purchase or lease, it being the intent and purpose of this section to measure the amount of privilege or franchise tax in each calendar month with reference to the gross receipts of the property operated for the previous calendar month and to fix liability for the payment of the tax on the owner, operator, or lessor on the first day of month.
(f)	Companies taxed under this section shall not be required to pay the franchise tax imposed by G.S. 105-122 or G.S. 105-123 unless the tax levied by G.S. 105-122 or G.S. 105-123 exceeds the tax levied in this section, and no county shall impose a franchise, license or privilege tax upon the business taxed under this section.
(g)	The Secretary of Revenue shall determine the total gross receipts derived from the sale within each municipality of the commodities or services described in this section, except water and sewerage services, and shall distribute to each municipality an amount equal to a tax of three and nine hundredths percent (3.09%) of the gross receipts from sales within the municipality. In determining the amount to be distributed to a municipality pursuant to this subsection, gross receipts from sales within a municipality do not include receipts from sales of piped gas to a manufacturer for use as an ingredient or component part of a manufactured product.
As soon as practicable after the end of each calendar quarter, the Secretary of Revenue shall, from the tax due and paid monthly during that quarter under this section, certify to the State Controller and to the State Treasurer the amount distributable to each municipality under this section. The State Controller shall thereupon issue a warrant on the State Treasurer to each municipality in the amount so certified.
So long as there is a distribution to municipalities of the amount herein provided from the tax imposed by this section, no municipality shall impose or collect any greater franchise, privilege or license taxes, in the aggregate, on the businesses taxed under this section, than was imposed and collected on or before January 1, 1947. If any municipality shall have collected any privilege, license or franchise tax between January 1, 1947, and April 1, 1949, in excess of the tax collected by it prior to January 1, 1947, then upon distribution of the taxes imposed by this section to municipalities, the amount distributable to any municipality shall be credited with such excess payment.
(h)	For purposes of subsection (g) and of G.S. 105-120(d), the term "municipality”includes any urban service district defined by the governing board of a consolidated city-county, and the amounts due thereby shall be distributed to the government of the consolidated city-county."
Sec. 41.  Effective July 1, 1990, G.S. 105-120 reads as rewritten:
"§ 105-120.  Franchise or privilege tax on telephone companies.
(a)	Every person, firm, or corporation, domestic or foreign, owning and/or operating a business entity for the provision of local telecommunications service, shall within 30 days after the first day of each month make and deliver to the Secretary of Revenue a monthly return, verified by the affirmation of the officer or authorized agent making such return, showing the total amount of gross receipts of such business entity for the the month immediately preceding such return, and pay, at the time of making such return, the franchise, license or privilege tax herein imposed. Gross receipts shall be reported on an accrual basis.
For purposes of this section:
(1)	‘Local telecommunications service' means telecommunications service provided wholly within a LATA entitling the user to access to a local telephone exchange for the privilege of telephonic quality communication with substantially all persons in the local telephone exchange.  Provided, however, local telecommunications service does not include intraLATA or interLATA toll telecommunications services, or private telecommunications services;
(2)	‘LATA' is a Local Access and Transport Area representing a geographical area comprising one or more telephone exchange areas;
(3)	‘InterLATA telecommunications' is telecommunications service provided between two or more LATAs;
(4)	‘Toll telecommunications service' means:
a.	A telephonic quality communication for which:
1.	There is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication; and
2.	The charge is paid within the United States; and
b.	A service which entitles the subscriber, upon payment of a periodic charge (determined as flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radiotelephone stations in a specified area which is outside the local telephone exchange;
(5)	‘Private telecommunications service' means a service furnished to a subscriber that entitles the subscriber to exclusive or priority use of a communications channel or group of channels between exchanges.
(b)	An annual franchise or privilege tax of three and twenty-two hundredths percent (3.22%), payable monthly, on the gross receipts of such business entity, is herein imposed for the privilege of engaging in such business within this State.  Provided, however, gross receipts from local telephone service shall not include telecommunications access charges. Such gross receipts shall include all rentals and other similar charges;  Provided, where any city or town in the State has heretofore sold at public auction to the highest bidder the right, license and/or privilege of engaging in such business in such city or town, based upon a percentage of gross revenue of such business entity, and is now collecting and receiving therefor a revenue tax not exceeding one percent of such revenues, the amount so paid by such business entity, upon being certified by the treasurer of such municipality to the Secretary of Revenue, shall be from time to time credited by the Secretary of Revenue to such business entity upon the tax imposed by the State under this section of this Chapter.  Telecommunications access charges are those charges paid to a provider of local telephone service for access to an interconnection with the local telephone exchange.
(c)	Repealed by Session Laws 1973, c. 1287, s. 3.
(d)	The Secretary of Revenue shall ascertain the total gross receipts derived from local business conducted within each municipality in this State by persons, firms or corporations taxed under this section, and out of the tax levied by this section, an amount equal to a tax of three and nine hundredths percent (3.09%) of the gross receipts from local business conducted within any municipality shall be distributed to such municipality. When a person, firm or corporation taxed under this section properly receives a credit on said taxes under the proviso in subsection (b) because of payments made to a municipality, such municipality's distributive share of the taxes levied by this section shall be reduced by the amount of the credit properly received by said person, firm or corporation. If the credit received under the proviso is greater than the municipality's distributive share of the taxes levied under this section, no distribution to such municipality shall be made.
As soon as practicable after the end of each calendar quarter, the Secretary of Revenue shall, from the tax due and paid monthly during that quarter under this section, certify to the State Controller and to the State Treasurer the amount distributable to each municipality under this section. The State Controller shall thereupon issue a warrant  on the State Treasurer to each municipality in the amount so certified.
In determining what constitutes local business conducted within a municipality for the purposes of this subsection, all business originating within a municipality, except long-distance calls, shall be construed as local business.
The Department of Revenue is hereby authorized and empowered to require any and all persons, firms or corporations taxed under this section to file additional reports disclosing the gross receipts derived from local business as herein defined and the gross receipts from long-distance business.
If the records of the corporation taxed under this section do not readily disclose allocation to municipalities of revenues from local business as above defined, the Secretary of Revenue shall prescribe some practicable method of allocating such local revenues.
(e)	Nothing in this section shall be construed to authorize the imposition of any tax upon interstate commerce.
(f)	Counties, cities and towns shall not levy any franchise, license, or privilege tax on the business taxed under this section or under G.S. 105-164.4(4c)."
PART VI.
Public School Fund Created.
Sec.  42.  G.S. 115C-408 reads as rewritten:
"§ 115C-408. Funds under control of the State Board of Education.
(a)	It is the policy of the State of North Carolina that the general and uniform system of free public schools provided for in the Constitution shall be a priority item in the State's budget and that at all times sufficient funds shall be available to pay the State's share of the costs of such public schools.  To that end there is created within the General Fund an account in the State Budget for a Public School Fund to which there shall be appropriated biennially from the General Fund revenues collected by the Secretary of Revenue from Sales and Corporate Income taxes and the other tax and nontax revenues received by the General Fund and from which there shall be appropriated and disbursed the State's share of the costs of operating such public schools for the biennium.
It is the further policy of the State of North Carolina to create a public school system that graduates good citizens with the skills demanded in the marketplace, and the skills necessary to cope with contemporary society, using State, local and other funds in the most cost-effective manner.  The Board shall have general supervision and administration of the educational funds provided by the State and federal governments, except those mentioned in Section 7 of Article IX of the State Constitution, and also excepting such local funds as may be provided by a county, city, or district.
(b)	To insure a quality education for every child in North Carolina, and to assure that the necessary resources are provided, it is the policy of the State of North Carolina to provide from State revenue sources the instructional expenses for current operations of the public school system as defined in the standard course of study.
It is the policy of the State of North Carolina that the facilities requirements for a public education system will be met by county governments.
It is the intent of the 1983 General Assembly to further clarify and delineate the specific financial responsibilities for the public schools to be borne by State and local governments."
PART VII.
Effective Dates.
Sec. 43.  Sections 29, 40, and 41 of this act shall become effective July 1, 1990, and apply to gross receipts earned from services and commodities provided on or after that date and to sales of electricity, piped natural gas, or telephone service made on or after that date.  Section 14 of this act shall become effective upon convening of the 1991 Regular Session of the General Assembly.  The remainder of this act shall become effective July 1, 1989, and Sections 24 through 39 shall apply to sales made on or after that date.