GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

H	1 

HOUSE BILL 1205

Short Title:  Simplify Soft Drink Tax.	(Public)
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Sponsors: Representative McGee.
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Referred to:  Finance.
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May 10, 1991

A BILL TO BE ENTITLED
AN ACT TO SIMPLIFY THE ADMINISTRATION OF THE EXCISE TAX ON SOFT DRINKS AND TO CHANGE THE TAX ON BOTTLED DRINKS FROM A TAX PER BOTTLE TO A TAX PER GALLON.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-113.44 reads as rewritten:
"§ 105-113.44. Definitions.
The following definitions apply in this Article:
(1)	Base product.  The compound mixture or basic ingredients to which liquid milk or another liquid is added to complete a soft drink.  The term includes a powder, a simple syrup, a chocolate syrup, other syrups, and a concentrate.
(2)	Bottled.  In a closed container of any kind.
			(6)	Distributor.  A person who makes bottled soft drinks or base products or who acquires bottled soft drinks or base products for sale to a wholesale dealer or a retail dealer.
(7)	 Juice.  Any of the following:
a.	The liquid that results from pressing fresh fruit or fresh vegetables.
b.	The concentrate produced by dehydrating a liquid described in subpart a.
c.	The liquid that results from adding water to a concentrate described in subpart b.
(8)	 Milk.  Any of the following:
a.	Liquid milk, regardless of butterfat content.
b.	The powder produced by dehydrating liquid milk.
c.	The liquid that results from adding water to dehydrated liquid milk.
(9)	Natural.  Without added ingredients of any kind other than vitamins.  Added ingredients include sugar, salt, preservatives, artificial flavoring, coloring, and carbonation.
		(12)	Person.  An individual, a firm, a partnership, an association, a corporation, or any other organization or group acting as a unit.
(13)	 Powder.  Crystals, granules, tablets, and other dry products.
(14)	Retail dealer.  A person who sells bottled soft drinks or base products to the ultimate consumer or who makes soft drinks from base products and sells the soft drinks to the ultimate consumer.
(15)	Sale.  A transfer, a trade, an exchange, or a barter, in any manner or by any means, with or without consideration.
(16)	Secretary.  The Secretary of Revenue.
(17)	Soft drink.  A beverage that is not an alcoholic beverage, as defined in G.S. 105-113.68.
		(20)	Wholesale dealer.  A person who sells bottled soft drinks or base products to another for resale."
Sec. 2.  G.S. 105-113.45 reads as rewritten:
"§ 105-113.45. Excise taxes on soft drinks and base products.
(a)	Bottled Soft Drinks. –  An excise tax of ten cents (10¢) a gallon is levied on bottled soft drinks.
	(c)	Liquid Base Products. –  An excise tax of one dollar ($1.00) a gallon, or four-fifths of a cent (4/5¢) an ounce or fraction of an ounce, is levied on a liquid base product.  The tax applies regardless whether the liquid base product is diverted to and used for a purpose other than making a soft drink.
(d)	Dry Base Products. –  An excise tax is levied on a dry base product at the rate:
(1)	Of one cent (1¢) an ounce or fraction of an ounce if the dry base product is not converted into a syrup or other liquid base product before it is used to make a soft drink.
(2)	That would apply under subsection (c) to the resulting liquid base product if the dry base product is converted into a liquid base product before it is used to make a soft drink.
	."
Sec. 3. G.S. 105-113.46 reads as rewritten:
"§ 105-113.46. Exemptions.
The taxes imposed by this Article do not apply to an item that is listed in this section and, if the item is a bottled soft drink or a juice concentrate included in subdivisions (2)	or (3), is registered with the Secretary in accordance with G.S. 105-113.47:
(1)	A natural liquid milk drink produced by a farmer or a dairy.
(2)	A bottled soft drink that contains at least thirty-five percent (35%) natural milk measured by volume and is not exempt under subdivision (1).
(3)	Natural juice.
(4)	Natural water.
(5)	A base product used to make a bottled soft drink subject to tax under this Article.
(6)	A bottled soft drink or base product sold outside the State.
(7)	A bottled soft drink or base product sold to the federal government.
(8)	A base product for domestic rather than commercial use, except a base product that does not contain any natural milk and to which natural water is added to make a soft drink.
."
Sec. 4.  G.S. 105-113.47 reads as rewritten:
"§ 105-113.47. Registration of certain exempt bottled soft drinks and juice concentrates.
(a)	Requirement. –To be exempt from the tax imposed by this Article, a bottled soft drink that contains at least thirty-five percent (35%) natural milk measured by volume and is not exempt under G.S. 105-113.46(1), a natural juice bottled soft drink, and a natural juice concentrate must be registered with the Secretary as an exempt item.  To register an item as exempt, the person who controls the brand name or formula of the item must file an application for registration with the Secretary on a form provided by the Secretary.  An application must include an affidavit stating the complete and itemized formula by volume of the bottled soft drink or juice concentrate that is the subject of the application.
(b)	Determination. –The Secretary shall determine whether a bottled soft drink or a juice concentrate for which an application for registration is filed meets the criteria for exemption.  To make the determination, the Secretary or a representative of the Secretary may require the person who filed the registration application for the item or anyone who sells the item in this State to provide a sample of the item and may have the sample analyzed by a chemist to verify the accuracy of the submitted formula.
(c)	No Disclosure. –  Except as required by law or allowed under this subsection, the Secretary or an agent or employee of the Secretary may not disclose part or all of the formula of an item for which an application for registration is filed. The Secretary may disclose whether an item meets the exemption criteria and the Attorney General or other legal representative of the State may examine the formula for an item if the grant or denial of an exemption for the item is challenged.
(d)	Effect. –  Registration as an exempt item applies prospectively to sales of the registered bottled soft drink or registered juice concentrate made on or after the date of registration.  Registration does not relieve a person of liability for taxes due on sales made before the date an item is registered."
Sec. 5.  G.S. 105-113.50 reads as rewritten:
"§ 105-113.50. Soft drink licenses required.
(a)	Distributors and Wholesale Dealers. –  Distributors and wholesale dealers shall obtain for each place of business a continuing soft drink license for which a fee of twenty-five dollars ($25.00) shall be paid. For the purpose of this subsection, 'place of business' means any place where a distributor makes bottled soft drinks or base products or any place where a distributor or a wholesale dealer receives or stores non-tax-paid bottled soft drinks or non-tax-paid base products.
	(c)	Retail Dealers. –Retail dealers shall obtain for each place of business a continuing soft drink license for which a fee of five dollars ($5.00) shall be paid.  For the purpose of this subsection, 'place of business' means any place where a retail dealer receives non-tax-paid bottled soft drinks or non-tax-paid base products.
	."
Sec. 6.  G.S. 105-113.50A reads as rewritten:
"§ 105-113.50A. Local taxation.
Except as authorized by G.S. 105-102.5(e), a county or city may not levy a privilege license tax upon the business of bottling, manufacturing, producing, purchasing, selling at wholesale or retail, jobbing, consigning, using, shipping, or distributing for the purpose of sale within this State bottled soft drinks or base products."
Sec. 7.  G.S. 105-113.51 reads as rewritten:
"§ 105-113.51. Liability for and payment of excise taxes.
					(a)	Primary Liability. –  The distributor, wholesale dealer, or retail dealer who first distributes, sells, consumes, or otherwise handles bottled soft drinks or base products in this State is liable for the tax imposed by this Article.  A distributor, wholesale dealer, or retail dealer who brings into this State a bottled soft drink or base product made outside the State is the first person to handle the bottled soft drink or base product in this State.  A distributor, wholesale dealer, or retail dealer who is the original consignee of a bottled soft drink or base product that is made outside the State and is shipped into the State is the first person to handle the bottled soft drink or base product in this State.
(b)	Secondary Liability. –  A retail dealer who acquires non-tax-paid bottled soft drinks or non-tax-paid base products from a distributor or a wholesale dealer is liable for any tax due on the bottled soft drinks or base products.  A retail dealer who is liable for tax under this subsection may not deduct a discount from the amount of tax due when reporting the tax.
(c)	Monthly Report. –  Except for tax on a designated sale under subsection (d), the taxes levied by this Article are payable when a report is required to be filed.  A report is due on a monthly basis.  A monthly report covers sales and other activities occurring in a calendar month and is due within 15 days after the end of the month covered by the report.  A report shall be filed on a form provided by the Secretary and shall contain the information required by the Secretary.
(d)	Designation of Exempt Sale. –  A distributor or a wholesale dealer who sells a bottled soft drink or a base product to a person who has notified the distributor or wholesale dealer in writing that the person intends to resell the item in a transaction that is exempt from tax under G.S. 105-113.46(7) or (8) may, when filing a monthly report under subsection (c), designate the quantity of bottled soft drinks or base products sold to the person for resale.  A distributor or wholesale dealer shall report a designated sale on a form provided by the Secretary.
A distributor or a wholesale dealer is not required to pay tax on a designated sale when filing a monthly report.  The distributor or wholesale dealer shall pay the tax due on all other sales in accordance with this section.  A distributor, a wholesale dealer, or a customer of a distributor or wholesale dealer may not delay payment of the tax due on a bottled soft drink or base product by failing to pay tax on a sale that is not a designated sale or by overstating the quantity of bottled soft drinks or base products that will be resold in a transaction exempt under G.S. 105-113.46(7)	or (8).
A person who does not sell a bottled soft drink or base product in a transaction exempt under G.S. 105-113.46(7)	or (8) after a distributor or a wholesale dealer has failed to pay the tax due on the sale of the item to the person in reliance on the person's written notification of intent is liable for the tax and any penalties and interest due on the designated sale.  If the Secretary determines that a bottled soft drink or a base product reported as a designated sale is not sold as reported, the Secretary shall assess the person who notified the distributor or wholesale dealer of an intention to resell the item in an exempt transaction for the tax due on the sale and any applicable penalties and interest.  A distributor or a wholesale dealer who does not pay tax on a bottled soft drink or base product in reliance on a person's written notification of intent to resell the item in an exempt transaction is not liable for any tax assessed on the item.
(e)	Refund. –  A distributor, a wholesale dealer, or a retail dealer who pays tax on a bottled soft drink or a base product that is exempt from the tax may obtain a refund for the amount of tax paid by filing an application for refund with the Secretary on a form provided by the Secretary.  A refund for tax paid in the first six months of a calendar year must be submitted by July 15, and a refund for tax paid in the second six months of a calendar year must be submitted by January 15."
Sec. 8.  G.S. 105-113.52 reads as rewritten:
"§ 105-113.52. Tax reduction and discount.
				(a)	Tax Reduction. –  The tax on the first 216,000 gallons of bottled soft drinks sold at wholesale on or after October 1 of each year by a distributor or wholesale dealer is five cents (5¢) a gallon rather than the amount stated in G.S. 105-113.45.  When reporting tax due on bottled soft drinks to which this reduced rate applies, a distributor or wholesale dealer shall pay the reduced amount.
(b)	Discount. – A distributor, a wholesale dealer, or a retail dealer who is liable for the excise taxes on bottled soft drinks or base products and who files a timely report under G.S. 105-113.51 may deduct from the amount due with the report a discount of four percent (4%).  This discount covers losses due to spoilage and breakage, expenses incurred in preparing the records and reports required by this Article, and the expense of furnishing a bond.  The discount does not apply to taxes paid at the rate set in subsection (a)."
Sec. 9.  G.S. 105-113.53 reads as rewritten:
"§ 105-113.53. Bonds.
The Secretary may require a distributor, a wholesale dealer, or a retail dealer to furnish a bond in an amount that adequately protects the State from loss if the distributor or dealer fails to pay taxes due under this Article.  A bond shall be conditioned on compliance with this Article, shall be payable to the State, and shall be in the form required by the Secretary.  The Secretary shall proportion a bond amount to the anticipated tax liability of the distributor, wholesale dealer, or retail dealer.  The Secretary shall periodically review the sufficiency of bonds required of distributors, wholesale dealers, and retail dealers and shall increase the amount of a required bond when the amount of the bond furnished no longer covers the anticipated tax liability of the distributor or dealer."
Sec. 10. G.S. 105-113.57 reads as rewritten:
"§ 105-113.57. Records required of ingredients received.
Every person engaged in the business of making bottled soft drinks or base products shall keep a record of the ingredients purchased to make the bottled soft drinks or base products and shall retain invoices on the purchases for at least three years.  The records shall show the quantity of ingredients purchased, the date received, and the name of the person from whom they were received.  The records shall be open at all times for inspection by the Secretary or a representative of the Secretary."
Sec. 11.  G.S. 105-113.58 reads as rewritten:
"§ 105-113.58. Records of sales, inventories, and purchases to be kept.
Every distributor, wholesale dealer, and retail dealer shall keep accurate records of the distributor's or dealer's purchases, inventories, and sales of bottled soft drinks and base products.  These records shall be open at all times for inspection by the Secretary or an authorized representative of the Secretary."
Sec. 12.  G.S. 105-113.43, 105-113.48, 105-113.49, 105-113.54 through 105-113.56C, 105-113.59 through 105-113.62, 105-113.66, and 105-113.67 are repealed.
Sec. 13.  The Secretary of Revenue shall redeem any unused or mutilated but identifiable tax stamps or crowns purchased pursuant to Article 2B of Chapter 105 of the General Statutes that a taxpayer presents for redemption and shall refund the face value of the stamps or crowns, less the discount allowed at the time of the purchase of the stamps or crowns by the taxpayer.
Sec. 14.  The Secretary of Revenue shall review the registrations of bottled soft drinks and juice concentrates made under G.S. 105-113.47 before the effective date of this act.  The Secretary shall notify those registrants who no longer appear to meet the exemption criteria that, for the bottled soft drink or juice concentrate to continue to be exempt from the excise tax imposed by Article 2B of Chapter 105 of the General Statutes, a new registration application must be submitted.  The excise tax imposed by Article 2B of Chapter 105 of the General Statutes applies to a previously registered bottled soft drink or juice concentrate unless the Secretary determines from the new application that the bottled soft drink or juice concentrate continues to meet the exemption criteria.
Sec. 15.  This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before its amendment or repeal; nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended or repealed statute before its amendment or repeal.
Sec. 16.  This act becomes effective October 1, 1991.