GENERAL ASSEMBLY OF NORTH CAROLINA
1989 SESSION

CHAPTER 945
SENATE BILL 1586

AN ACT TO ACCELERATE THE PAYMENT OF SALES TAXES AND GROSS RECEIPTS TAXES BY UTILITIES AND TO ACCELERATE THE PAYMENT OF WITHHELD INDIVIDUAL INCOME TAXES BY EMPLOYERS.

The General Assembly of North Carolina enacts:

Section 1.  G.S. 105-164.16 reads as rewritten:
"§ 105-164.16.  Report and payment of taxes.
(a)	Payment. – Taxes levied under this Article are due when a return is required to be filed. Every taxpayer liable for the tax imposed by this Article shall, within the specified time after the end of the appropriate reporting period, submit a return to the Secretary, on a form prescribed by the Secretary, stating the taxpayer's gross sales for the reporting period, the amount and type of sales made in the period that are exempt from tax under G.S. 105-164.13 or are elsewhere excluded from tax, the amount of tax due, and any other information required by the Secretary. Each return shall be accompanied by a payment to the Secretary for the amount of taxes shown to be due on the return and shall be signed by the taxpayer or his agent. Returns that do not contain the required information shall not be accepted. When an unacceptable return is submitted, the Secretary shall require a corrected return to be filed.
(b)	General Reporting Periods. – Returns of taxpayers who are required by this subsection to report on a monthly or quarterly basis are due within 15 days after the end of each monthly or quarterly period. Returns of taxpayers who are required to report on a semimonthly basis are due within 10 days after the end of each semimonthly period.
A taxpayer who is consistently liable for less than twenty-five dollars ($25.00) a month in State and local sales and use taxes may, with the approval of the Secretary, file a return on a quarterly basis. A taxpayer who is consistently liable for at least twenty thousand dollars ($20,000) a month in State and local sales and use taxes shall, when directed to do so by the Secretary, file a return on a semimonthly basis. All other taxpayers shall file a return on a monthly basis. Quarterly reporting periods end on the last day of March, June, September, and December; monthly reporting periods end on the last day of the month; and semimonthly reporting periods end on the 15th of each month and the last day of each month.
The Secretary shall monitor the amount of tax remitted by a taxpayer and shall direct a taxpayer who consistently remits at least twenty thousand dollars ($20,000) each month to file a return on a semimonthly basis. In determining the amount of tax due from a taxpayer for a reporting period the Secretary shall consider the total amount due from all places of business owned or operated by the same person as the amount due from that person.
A taxpayer who is directed to remit sales and use taxes on a semimonthly basis but who is unable to gather the information required to submit a complete return for either the first reporting period or both the first and second semimonthly reporting periods may, upon written authorization by the Secretary, file an estimated return for that first reporting period or both periods on the basis prescribed by the Secretary. Once a taxpayer is authorized to file an estimated return for the first period or both periods, the taxpayer may continue to file an estimated return for the first or both periods until the Secretary, by written notification, revokes the taxpayer's authorization to do so. When filing a return for the second semimonthly reporting period, a taxpayer who files an estimated return for the first period but not both periods shall remit the amount of tax due for both the first and second reporting periods, less the amount he remitted with his estimated return.
A taxpayer who files an estimated return for both periods is considered to have been granted an extension for both the first and second reporting periods. Notwithstanding G.S. 105-164.19, if a taxpayer who files an estimated return for both periods files a reconciling return for those periods within ten days of the due date of the return for the second period and any underpayment of estimated taxes remitted with the reconciling return is less than ten percent (10%) of the amount of taxes due for both the first and second reporting periods, no interest shall be charged. Otherwise, a taxpayer who files an estimated return for both periods shall be charged interest at the statutory rate from the due date of the return for the first reporting period to the date the reconciling return is filed.
(c)	Sales Tax on Utility Services. – A return for taxes levied under G.S. 105-164.4(a)(4a) and G.S. 105-164.4(a)(4c) is due quarterly or monthly as specified in this subsection.  A utility that is allowed to pay tax under G.S. 105-120 on a quarterly basis shall file a quarterly return.  All other utilities shall file a monthly return.  A quarterly return is due by the last day of the month following the quarter covered by the return.  A monthly return is due by the last day of the month following the month in which the taxes accrue, except the return for taxes that accrue in May.  A return for taxes that accrue in May is due by June 25.
A utility that is required to file a monthly return may file an estimated return for the first month, the second month, or both the first and second months in a quarter.  A utility is not subject to interest on or penalties for an underpayment submitted with an estimated monthly return if the utility timely pays at least ninety-five percent (95%) of the amount due with a monthly return and includes the underpayment with the company's return for the third month in the same quarter."
Sec. 2.  G.S. 105-164.21A reads as rewritten:
"§ 105-164.21A.  Deduction for municipalities that sell electric power.
A municipality that pays the retail sales tax imposed by this Article on electricity may deduct from the amount of tax payable by the municipality an amount equal to three percent (3%) of the difference between its gross receipts from sales of electricity for the preceding reporting period and the amount paid by the municipality for purchased power and related services during that reporting period."
Sec. 3.  G.S. 105-116(b), as amended by Chapter 813 of the 1989 Session Laws, reads as rewritten:
"(b)	Report and Payment.  The tax imposed by this section is payable monthly or quarterly as specified in this subsection.  A report is due quarterly.  An electric power company or a natural gas company shall pay tax monthly.  A monthly tax payment is due by the last day of the month that follows the month in which the tax accrues, except the payment for tax that accrues in May.  The payment for tax that accrues in May is due by June 25.  An electric power company or a natural gas company is not subject to interest on or penalties for an underpayment of a monthly amount due if the company timely pays at least ninety-five percent (95%) of the amount due and includes the underpayment with the next report the company files.  A water company or a public sewerage company shall pay tax quarterly when filing a report.
A quarterly report covers a calendar quarter and is due by the last day of the month that follows the quarter covered by the report.  A company shall submit a report on a form provided by the Secretary.  The report shall include the company's gross receipts from all property it owned or operated during the reporting period in connection with its business taxed under this section and shall contain the following information:
(1)	The company's gross receipts for the reporting period from business inside and outside this State, stated separately.
(2)	The company's gross receipts from commodities or services described in subsection (a) that are sold to a vendee subject to the tax levied by this section or to a joint agency established under G.S. Chapter 159B or a municipality having an ownership share in a project established under that Chapter.
(3)	The amount of and price paid by the company for commodities or services described in subsection (a) that are purchased from others engaged in business in this State and the name of each vendor.
(4)	For an electric power company or a natural gas company, the company's gross receipts from the sale within each municipality of the commodities and services described in subsection (a).
A company shall report its gross receipts on an accrual basis."
Sec. 4.  G.S. 105-120(b), as amended by Chapter 813 of the 1989 Session Laws, reads as rewritten:
"(b)	Report and Payment.  The tax imposed by this section is payable monthly or quarterly as specified in this subsection.  A report is due quarterly.  A company that is liable for an average of less than three thousand dollars ($3,000) a month in tax imposed by this section may, with the approval of the Secretary of Revenue, pay tax quarterly when filing a report.  All other companies shall pay tax monthly.  A monthly tax payment is due by the last day of the month that follows the month in which the tax accrues, except the payment for tax that accrues in May.  The payment for tax that accrues in May is due by June 25.  A company is not subject to interest on or penalties for an underpayment of a monthly amount due if the company timely pays at least ninety-five percent (95%) of the amount due and includes the underpayment with the next report the company files.
A quarterly report covers a calendar quarter and is due by the last day of the month that follows the quarter covered by the report.  A company shall submit a report on a form provided by the Secretary.  The report shall state the company's gross receipts for the reporting period from providing local telecommunications service and from providing local telecommunications service within each municipality served.  A company shall report its gross receipts on an accrual basis."
Sec. 5.  G.S. 105-163.1 reads as rewritten:
"§ 105-163.1.  Definitions.
The following definitions apply in this Article:
(1)	Code. – The Internal Revenue Code as enacted as of January 1, 1990, including any provisions enacted as of that date which become effective either before or after that date.
	(3)	Dependent. – An individual with respect to whom an income tax exemption is allowed under the Code.
(4)	Employee. – An individual, whether a resident or a nonresident of this State, who performs services in this State for wages or an individual who is a resident of this State and performs services outside this State for wages. The term includes an ordained or licensed clergyman who elects to be considered an employee under G.S. 105-163.1A, an officer of a corporation, and an elected public official.
(5)	Employer. – A person for whom an individual performs 
		services for wages.  In applying the requirements to withhold income taxes from wages and pay the withheld taxes, the term includes a person who:
a.	Controls the payment of wages to an individual for services performed for another.
b.	Pays wages on behalf of a person who is not engaged in trade or business in this State.
c.	Pays wages on behalf of a unit of government that is not located in this State.
d.	Pays wages for any other reason.
	a.	For agricultural labor where such remuneration is paid to workers employed on the farm for services rendered on the farm in the production, harvesting, and transportation of agricultural products to market for the farmer-employer; or
		1.	On each of some 24 days during such quarter such individual performs for such employer for some portion of the day service not in the course of the employer's trade or business; or
	d.	For services not in the course of the employer's trade or business, to the extent paid in any medium other than cash; or
	1.	From or to a trust described in § 401(a) of the Code which is exempt from tax under § 501(a) of the Code at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust; or
	(7)	The term "transient employer" means an "employer" who is not a resident of this State and who temporarily engages in any activity within the State for the production of income. Without intending to exclude others who may come within the foregoing definition, any nonresident "employer" engaging in any such activity within the State which, as of any date, cannot be reasonably expected to continue for a period of 18 consecutive months shall be deemed to be temporarily engaged in such activity. 
(8)	Fiduciary. – A guardian, a trustee, an executor, an administrator, a receiver, a conservator, or other person acting in a fiduciary capacity for another.
(9)	Fiscal year. – Defined in section 441(e) of the Code.
(10)	Individual. – A natural person.
(11)	Miscellaneous payroll period. –  A payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.
(12)	Payroll period. – A period for which an employer ordinarily pays wages to an employee of the employer.
(13)	Person. –  An individual, a fiduciary, a partnership, a corporation, or a unit of government.  The term includes an officer or employee of a corporation, a member or employee of a partnership, and an employee of an individual proprietorship who, as officer, employee, or member, is under a duty to perform an act in meeting the requirements of this Division.
(14)	Taxable year. – Defined in section 441(b) of the Code.
(14a)	Secretary. – The Secretary of Revenue.
(15)	Wages. – The term has the same meaning as in section 3401 of the Code except it does not include remuneration paid by a farmer for services performed on the farmer's farm in producing or harvesting agricultural products or in transporting the agricultural products to market."
Sec. 6.  G.S. 105-163.1A reads as rewritten:
"§ 105-163.1A.  Ordained or licensed clergyman may elect to be considered-an employee.
An ordained or licensed clergyman who performs services for a church of any religious denomination may file an election with the Secretary and the church he serves to be considered an employee of the church instead of self-employed.  Until a clergyman files an election, amounts paid by a church to a clergyman are not subject to withholding. A church shall withhold taxes from a clergyman's wages after the clergyman files an election with it under this section."
Sec. 7.  G.S. 105-163.2(a) reads as rewritten:
"(a)	
An employer shall deduct and withhold from the wages of each employee the State income taxes payable by the employee on the wages.  For each payroll period, the employer shall withhold from the employee's wages an amount that would approximate the employee's income tax liability under Article 4 of this Chapter if the employer withheld the same amount from the employee's wages for each similar payroll period in a calendar year.  In calculating an employee's anticipated income tax liability, the employer shall allow for the exemptions, deductions, and credits to which the employee is entitled under Article 4 of this Chapter.  The amount of State income taxes withheld by an employer is held in trust for the Secretary."
Sec. 8.  G.S. 105-163.3 reads as rewritten:
"§ 105-163.3.  Withholding in accordance with regulations.
The manner of withholding and the amount to be deducted and withheld under G.S. 105-163.2 shall be determined in accordance with tables, rules, and regulations adopted by the Secretary.  The withholding exemption allowed by these tables, rules, and regulations shall, as nearly as possible, approximate the exemptions, deductions, and credits to which an employee would be entitled under Article 4 of this Chapter."
Sec. 9.  G.S. 105-163.4 reads as rewritten:
"§ 105-163.4.  No withholding from reimbursement for expenses.
The amount an employer pays an employee as reimbursement for ordinary and necessary expenses incurred by the employee on behalf of the employer and in the furtherance of the business of the employer is not wages and is not subject to withholding under this Article."
Sec. 10.  G.S. 105-163.6 reads as rewritten:
"§ 105-163.6.  When employer must file returns and pay withheld taxes.
(a)	General. – A return is due quarterly or monthly as specified in this section.  A return shall be filed with the Secretary on a form prepared by the Secretary, shall report any payments of withheld taxes made during the period covered by the return, and shall contain any other information required by the Secretary.
Withheld taxes are payable quarterly, monthly, or within three banking days, as specified in this section.  Withheld taxes shall be paid to the Secretary or to a financial institution with which the Secretary has entered a contract to receive payment of withheld taxes.
If the Secretary finds that collection of the amount of taxes this Article requires an employer to withhold is in jeopardy, the Secretary may require the employer to file a return or pay withheld taxes at a time other than that specified in this section.
(b)	Quarterly. –  An employer who withholds an average of less than five hundred dollars ($500.00) of State income taxes from wages each month shall file a return and pay the withheld taxes on a quarterly basis.  A quarterly return covers a calendar quarter and is due by the last day of the month following the end of the quarter.
(c)	Monthly. –  An employer who withholds an average of at least five hundred dollars ($500.00) but less than two thousand dollars ($2,000) from wages each month shall file a return and pay the withheld taxes on a monthly basis.  A return for the months of January through November is due by the 15th day of the month following the end of the month covered by the return.   A return for the month of December is due the following January 31.
	(d)	Three Banking Days. – An employer who withholds an average of at least two thousand dollars ($2,000) of State income taxes from wages each month shall file a return by the date set under the Code for filing a return for federal income taxes withheld from the same wages and shall pay the withheld State taxes by the date set under the Code for depositing or paying federal income taxes withheld from the same wages.  The date set by the Code for depositing or paying federal income taxes withheld from wages shall be determined without regard to § 6302(g) of the Code.
An extension of time granted to file a return for federal income taxes withheld from wages is an automatic extension of time for filing a return for State income taxes withheld from the same wages, and an extension of time granted to pay federal income taxes withheld from wages is an automatic extension of time for paying State income taxes withheld from the same wages.  An employer who pays withheld State income taxes under this subsection is not subject to interest on or penalties for an underpayment of an amount due if the employer timely pays at least ninety-five percent (95%) of the amount due and includes the underpayment with the next return the employer files.
(e)	Category. – The Secretary shall monitor the amount of taxes withheld by an employer or estimate the amount of taxes to be withheld by a new employer and shall direct each employer to pay withheld taxes in accordance with the appropriate schedule.  An employer shall file a return and pay withheld taxes in accordance with the Secretary's direction until notified in writing to file and pay under a different schedule.
	."
Sec. 11.  G.S. 105-163.7(b) reads as rewritten:
"(b)	The Secretary may require an employer to include information not listed in subsection (a) on the employer's written statement to an employee and to file the statement at a time not required by subsection (a). Every employer shall file an annual report with the Secretary that contains the information given on each of the employer's written statements to an employee and other information required by the Secretary.  The annual report is due on the same date the employer's federal information return of federal income taxes withheld from wages is due under the Code. The report required by this subsection is in lieu of the report required by G.S. 105-154."
Sec. 12.  G.S. 105-163.8 reads as rewritten:
"§ 105-163.8.  Liability of employer and others.
(a)	Employer.  An employer who withholds the proper amount of income taxes under G.S. 105-163.2 and pays the withheld amount to the Secretary is not liable to any person for the amount paid.  An employer who fails to withhold the proper amount of income taxes or pay the amount withheld to the Secretary is liable for the amount not withheld or not paid.  An employer who fails to withhold the amount of income taxes required by this Article or who fails to pay withheld taxes by the due date for paying the taxes is subject to a penalty equal to twenty-five percent (25%) of the amount of taxes not withheld or not timely paid to the Secretary.
(b)	Others.  A person who has a duty to deduct, account for, or pay taxes required to be withheld under G.S. 105-163.2 and who fails to do so is liable for the amount not deducted, not accounted for, or not paid."
Sec. 13.  G.S. 105-163.9 reads as rewritten:
"§ 105-163.9.  Refund of overpayment to employer.
	An employer who pays the Secretary more under this Article than the Article requires the employer to pay may obtain a refund of the overpayment by filing an application for a refund with the Secretary.  No refund is allowed, however, if the employer withheld the amount of the overpayment from the wages of the employer's employees.  An employer must file an application for a refund within the time period set in G.S. 105-266.  Interest accrues on a refund as provided in G.S. 105-266.
	."
Sec. 14.  G.S. 105-163.17 reads as rewritten:
"§ 105-163.17.  Administration.
The provisions of Article 9 of this Chapter 
apply to the amount of State income taxes this Article requires an employer to withhold and pay to the Secretary."
Sec. 15.  G.S. 105-259 reads as rewritten:
"§ 105-259.  Secrecy required of officials; penalty for violation.
With respect to any one of the following persons: (i) the Secretary of Revenue and all other officers or employees, and former officers and employees, of the Department of Revenue; (ii) local tax officials, as defined in G.S. 105-273, and former local tax officials; (iii) members and former members of the Property Tax Commission; (iv) any other person authorized in this section to receive information concerning any item contained in any report or return, or authorized to inspect any report or return; and (v) the Commissioner of Insurance and all other officers or employees and former officers and employees of the Department of Insurance with respect to State and federal income tax returns filed with the Commissioner of Insurance by domestic insurance companies; and except in accordance with proper judicial order or as otherwise provided by law, it shall be unlawful for any of these persons to divulge or make known in any manner the amount of income, income tax or other taxes of any taxpayer, or information relating thereto or from which the amount of income, income tax or other taxes or any part thereof might be determined, deduced or estimated, whether it is set forth or disclosed in or by means of any report or return required to be filed or furnished under this Subchapter, or in or by means of any audit, assessment, application, correspondence, schedule or other document relating to the taxpayer, notwithstanding the provisions of Chapter 132 of the General Statutes or of any other law or laws relating to public records.  It shall likewise be unlawful to reveal whether or not any taxpayer has filed a return, and to abstract, compile or furnish to any person, firm or corporation not otherwise entitled to information relating to the amount of income, income tax or other taxes of a taxpayer, any list of names, addresses, social security numbers or other personal information concerning the taxpayer, whether or not the list discloses a taxpayer's income, income tax or other taxes, or any part thereof, except that when an election is made by a husband and wife under G.S. 105-152.1 to file a joint return, any information given to one spouse concerning the income or income tax of the other spouse reported or reportable on the joint return shall not be a violation of the provisions of this section.
Nothing in this section shall be construed to prohibit the publication of statistics, so classified as to prevent the identification of particular reports or returns, and the items thereof; the inspection of these reports or returns by the Governor, Attorney General, or their duly authorized representative; or the inspection by a legal representative of the State of the report or return of any taxpayer who shall bring an action to set aside or review the tax based thereon, or against whom an action or proceeding has been instituted to recover any tax or penalty imposed by this Subchapter; nor shall the provisions of this section prohibit the Department of Revenue furnishing information to other governmental agencies of persons and firms properly licensed under Schedule B, G.S. 105-33 to 105-113.  The Department of Revenue may exchange information with the officers of organized associations of taxpayers under Schedule B, G.S. 105-33 to 105-113, with respect to parties liable for these taxes and as to parties who have paid these license taxes.
When any record of the Department of Revenue has been photographed, photocopied, or microphotocopied pursuant to the authority contained in G.S. 8-45.3, the original of that record may thereafter be destroyed at any time upon the order of the Secretary of Revenue, notwithstanding the provisions of G.S. 121-5, G.S. 132-2, or any other law relating to the preservation of public records.  Any record that has not been so photographed, photocopied, or microphotocopied shall be preserved for three years, and thereafter until the Secretary of Revenue orders it destroyed.
Any person, officer, agent, clerk, employee, or local tax official or any former officer, employee, or local tax official who violates the provisions of this section shall be guilty of a misdemeanor and fined not less than two hundred dollars ($200.00) nor more than one thousand dollars ($1,000) and/or imprisoned, in the discretion of the court; and if the person committing the violation is a public officer or employee, that person shall be dismissed from such office or employment, and may not hold any public office or employment in this State for a period of five years thereafter.
Notwithstanding the provisions of this section, the Secretary of Revenue may permit the Commissioner of Internal Revenue of the United States, or the revenue officer of any other state imposing any of the taxes imposed in this Subchapter, or the duly authorized representative of either, to inspect the report or return of any taxpayer; or may furnish that person an abstract of the report or return of any taxpayer; or supply that person with information concerning any item contained in any report or return, or disclosed by the report of any investigation of any report or return of any taxpayer.  The permission, however, may be granted or the information furnished to the officer or agent only if the statutes of the United States or of the other state grant substantially similar privilege to the Secretary of Revenue of this State or the Secretary's duly authorized representative.  Notwithstanding any other provision of law, the Secretary may also furnish names, addresses, and account and identification numbers of (i) taxpayers who may be entitled to property held in the Escheat Fund to the Department of State Treasurer when that Department requests the information for the purpose of administering Chapter 116B of the General Statutes, and (ii) taxpayers to the Employment Security Commission when that Commission requests the information for the purpose of administering Article 2 of Chapter 96 of the General Statutes.  Neither this section nor any other law prevents the exchange of information between the Department of Revenue and the Department of Transportation's Division of Motor Vehicles when the information is needed by either to administer the laws with which they are charged.  Notwithstanding any other provision of law, State officers and employees who perform computerized data processing functions pursuant to G.S. 143-341(9) for the Department of Revenue are authorized to receive and process for the Department of Revenue information in reports and returns and are subject to the criminal provisions of this section.
Notwithstanding the provisions of this section, the Secretary of Revenue may contract with any person, firm or corporation to receive and address, sort, bag, or deliver to the United States Postal Service any bulk mailing originated by the Department of Revenue, and may deliver the mail to the contractor pursuant to the contract.  To ensure performance of the contract, the contractor shall furnish a bond in a form and amount acceptable to the Secretary.
Notwithstanding the provisions of this section, the Secretary of Revenue may contract with a financial institution for the receipt of withheld income tax payments under G.S. 105-163.6."
Sec. 16.  The revenue generated by Sections 1 through 15 of this act is nonrecurring revenue and shall therefore be used to fund only nonrecurring expenses.
Sec. 17.  Sections 10 and 11 of Chapter 814 of the 1989 Session Laws are repealed.
Sec. 18.  Sections 1 through 4 of this act shall become effective October 1, 1990, and shall apply to gross receipts earned from services and commodities provided on or after that date and to sales of electricity, piped natural gas, or telecommunications service made on or after that date.  Sections 5 through 15 of this act shall become effective January 1, 1991.  The remaining sections of this act are effective upon ratification.
In the General Assembly read three times and ratified this the 17th day of July, 1990.