GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

S	2 

SENATE BILL 108
Second Edition Engrossed 6/4/91

Short Title:  Sales Tax Administration Changes.	(Public)
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Sponsors: Senators Winner, Kincaid, and Staton.
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Referred to:  Finance.
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February 20, 1991

A BILL TO BE ENTITLED
AN ACT TO IMPROVE ADMINISTRATION OF THE SALES AND USE TAX BY INCREASING THE LICENSE TAXES, ALLOWING MORE SMALL RETAILERS TO FILE QUARTERLY SALES TAX RETURNS, AND EXTENDING THE LIMITATIONS PERIOD FOR ENFORCING LIABILITY AGAINST CERTAIN TRANSFEREES AND CORPORATE OFFICERS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-164.4(c) reads as rewritten:
"(c)	Any person who engages in any business for which a privilege tax is imposed by this Article shall immediately apply for and obtain from the Secretary upon payment of twenty-five dollars ($25.00) a license to engage in and conduct the business upon the condition that the person shall pay the tax accruing to the State under this Article; the person shall thereby be duly licensed and registered to engage in the 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.  
A license issued under this section becomes void if the license holder ceases to be engaged in a business for which a privilege tax is imposed by this Article and remains continuously out of business for a period of five years.  The burden of proving that a license is still valid is on the license holder. 
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. 2.  G.S. 105-164.5 reads as rewritten:
"§ 105-164.5. Imposition of tax; wholesale merchant.
There is 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 wholesale in this State as follows:
(1)	Every wholesale merchant as defined in this Article shall apply for and obtain an annual license and pay for the license a tax of twenty-five dollars ($25.00).  This license tax shall be paid in advance within the first 15 days of July in each year or, in the case of a new business, within 15 days after business is commenced. Manufacturers making wholesale sales, as defined in this Article, of their own manufactured products, directly and exclusively from the place where the products are manufactured are not required to obtain an annual wholesale license.
	(2)	The sale of any tangible personal property by any wholesale merchant to anyone other than to a registered retailer, wholesale merchant, or nonresident retail or wholesale merchant for resale shall be taxable at the rate provided in this Article upon the retail sale of tangible personal property.
	(3) 	The sale of any tangible personal property by any wholesale merchant to a nonresident retail or wholesale merchant must be in strict compliance with regulations promulgated by the Secretary. A sale that does not conform to the regulations is taxable at the rate provided in this Article upon the retail sale of tangible personal property.
	(4) 	Every wholesale merchant who sells tangible personal property to retailers or nonresident retail or wholesale merchants for resale shall deliver to the customer a bill of sale for each sale whether for cash or on credit, shall retain a duplicate or carbon copy of each bill of sale, and shall keep each bill of sale on file for at least three years from the date of sale. Failure to comply with this subsection shall subject the wholesale merchant to liability for tax upon the sales at the rate levied in this Article upon retail sales.
	(5) 	The tax levied is in addition to all other taxes."
Sec. 3.  G.S. 105-164.6(f) reads as rewritten:
"(f)	Every retailer engaged in business in this State selling or delivering tangible personal property for storage, use or consumption in this State shall immediately apply for and obtain from the Secretary upon payment of twenty-five dollars ($25.00) a license to engage in and conduct the business upon the condition that such person shall pay the tax accruing to the State under this Article; the person shall thereby be duly licensed and registered to engage in the 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.  
A license issued under this section becomes void if the license holder ceases to be engaged in a business for which a tax is imposed by this Article and remains continuously out of business for a period of five years.  The burden of proving that a license is still valid is on the license holder. "
Sec. 4.  G.S. 105-164.16(b) reads as rewritten:
"(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 fifty dollars ($50.00) 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."
Sec. 5.  G.S. 105-164.29 reads as rewritten:
"§ 105-164.29. Application for licenses by wholesale merchants and retailers.
Every application for a license by a wholesale merchant or retailer shall be made upon a form prescribed by the Secretary and shall set forth all information the Secretary may require.  The application shall be signed by the owner if a natural person; in the case of an association or partnership, by a member or partner; in the case of a corporation, by an executive officer or some other person specifically authorized by the corporation to sign the application, to which shall be attached the written evidence of his authority.  A wholesale merchant or retailer whose business extends into more than one county is required to secure only one license to cover all operations of the business throughout the State.
When the required application has been made the Secretary shall issue a license to the applicant. A license is not assignable and is valid only for the person in whose name it is issued and for the transaction of business at the place designated in the license.  The license holder shall display the license conspicuously at all times at the place for which it was issued.  
A person whose license has been previously suspended or revoked shall pay the Secretary twenty-five dollars ($25.00) for the reissuance of the license.  A wholesale merchant whose annual license has been previously suspended or revoked shall pay the Secretary twenty-five dollars ($25.00) for the reissuance of the license for the remainder of the license year.
Whenever a license holder fails to comply with this Article, the Secretary, upon hearing, after giving the license holder 10 days' notice in writing, specifying the time and place of hearing and requiring the license holder to show cause why the license should not be revoked, may revoke or suspend the license. The notice may be served personally or by registered mail directed to the last known address of the license holder.  All provisions with respect to review and appeals of the Secretary's decisions as provided by G.S. 105-241.2, 105-241.3, and 105-241.4 apply to this section.
Any wholesale merchant or retailer who engages in business as a seller in this State without a license or after the license has been suspended or revoked, and each officer of any corporation which so engages in business shall be guilty of a misdemeanor and subject to a fine of up to five hundred dollars ($500.00) for each offense."
Sec. 6.  G.S. 105-164.38 reads as rewritten:
"§ 105-164.38. Tax shall be a lien.
The tax imposed by this Article shall be a lien upon all property of any person subject to the provisions of this Article who transfers the business or stock of goods or goes out of business.   Such a person shall file the return required by this Article within 30 days after transferring the business or going out of business. The person to whom the business or the entire stock of goods was transferred shall withhold sufficient of the purchase money or money's worth in the event there is an exchange of properties to cover the taxes due until the former owner produces a receipt from the Secretary showing that the taxes have been paid or a certificate that no taxes are due.  If the transferee of a business or stock of goods fails to withhold purchase money or money's worth and the taxes remain unpaid after the 30-day period allowed, the transferee shall be personally liable for the taxes accrued and unpaid on account of the operation of the business by the former owner, to the extent of the purchase price paid by the transferee or fair market value of the property transferred whichever is greater.  The period of limitations for assessing liability against the transferee and enforcing the lien against the property shall expire one year after the end of the period of limitations for assessment against the transferor.  Except as otherwise provided in this section, the  transferee and the liability of the transferee are subject to the provisions of G.S. 105-241.1, 105-241.2, 105-241.3, and 105-241.4 and to other remedies for the collection of taxes to the same extent as if the transferee had incurred the original tax liability."
Sec. 7.  G.S. 105-253 reads as rewritten:
"§ 105-253. Personal liability of officers, trustees, or receivers.
(a)	Any officer, trustee, or receiver of any corporation required to file report with the Secretary of Revenue, having in his custody funds of the corporation, who allows the funds to be paid out or distributed to the stockholders of the corporation without having satisfied the Secretary of Revenue for any State taxes that are due and have accrued, shall be personally liable for the payment of the tax, and shall be subject to an additional penalty equal to the amount of tax due.
(b)	Each responsible corporate officer is personally and individually liable:
	(1) 	For all sales and use taxes collected by a corporation upon taxable transactions of the corporation, which liability shall be satisfied upon timely remittance of the taxes to the Secretary by the corporation;
	(2) 	For all sales and use taxes due upon taxable transactions of the corporation but upon which the corporation failed to collect the tax, but only if the responsible officer knew, or in the exercise of reasonable care should have known, that the tax was not being collected; and
	(3) 	For all taxes due from the corporation pursuant to the provisions of Article 36 and Article 36A of Subchapter V of this Chapter.
The liability of the responsible corporate officer is satisfied upon timely remittance of the tax to the Secretary by the corporation.  If the tax remains unpaid by the corporation after it is due and payable, the Secretary may assess the tax against, and collect the tax from, any responsible corporate officer in accordance with the provisions of G.S. 105-241.1, which officer shall be the ‘taxpayer' in such case, as referred to in G.S. 105-241.1 et seq.  As used in this section, the words ‘responsible corporate officer' include the president and the treasurer of the corporation and any other officers assigned the duty of filing tax returns and remitting taxes to the Secretary on behalf of the corporation.  Any penalties which may be imposed pursuant to the provisions of G.S. 105-236 and which are applicable to a deficiency shall apply to any assessment provided for in this section.  All other provisions of Article 9 of this Chapter apply to the assessment to the extent they are not inconsistent with this section.
(b1)	The period of limitations for assessing any liability against a corporate officer, trustee, or receiver shall expire one year after the expiration of the period of limitations for assessment against the corporation.
(c)	The Secretary of State shall withhold the issuance of any certificate of dissolution to, or withdrawal of, any corporation, domestic or foreign, until the receipt by him of a notice from the Secretary of Revenue to the effect that any such corporation has met the requirements with respect to reports and taxes required by this Subchapter."
Sec. 8.  Section 4 of this act becomes effective July 1, 1992.  The remaining sections of this act become effective July 1, 1991.  Sections 1 through 5 of this act apply to licenses issued or renewed on or after July 1, 1991.  This act does not extend a period of limitations that expires before the act is ratified.