GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

S	1 

SENATE BILL 963

Short Title:  Raise State Sales Tax.	(Public)
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Sponsors: Senators Daniel, Basnight, Plyler, and Royall.
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Referred to:  Rules Suspended; Passed 1st Reading; Calendar 7/1/91.
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June 28, 1991

A BILL TO BE ENTITLED
AN ACT TO INCREASE THE STATE SALES TAX BY ONE CENT.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-164.4 reads as rewritten:
"§ 105-164.4.  Tax imposed on retailers.
(a)	A privilege tax is imposed on a retailer at the following percentage rates of the retailer's net taxable sales or gross receipts, as appropriate.  The general rate of tax is four percent (4%).
(1)	The general rate of tax applies to the sales price of each item or article of tangible personal property that is sold at retail and is not subject to tax under another subdivision in this section.
(1a)	The rate of two percent (2%) applies to the sales price of each manufactured home sold at retail, including all accessories attached to the manufactured home when it is delivered to the purchaser.  The maximum tax is three hundred dollars ($300.00) per article.  Each section of a manufactured home that is transported separately to the site where it is to be erected is a separate article.
(1b)	The rate of two percent (2%) applies to the sales price of each aircraft, boat, railway car, or locomotive sold at retail, including all accessories attached to the item when it is delivered to the purchaser.  The maximum tax is one thousand five hundred dollars ($1,500) per article.
(1c)	The rate of one percent (1%) applies to the sales price of the following articles:
a.	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 rate of tax provided in this subdivision.
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.
(1d)	The rate of one percent (1%) applies to the sales price of the following articles.  The maximum tax is eighty dollars ($80.00) per article.
a.	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.
b.	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.
c.	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.
d.	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.
e.	Sales to freezer locker plants of machinery used in the direct operation of said freezer locker plant and of parts and accessories thereto.
f.	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.
g.	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.
h.	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.
i.	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)	The applicable percentage rate applies to the gross receipts derived from the lease or rental of tangible personal property by a person who is engaged in the business of leasing or renting tangible personal property, or is a retailer and leases or rents property of the type sold by the retailer.  The applicable percentage rate is the rate and the maximum tax, if any, that applies to a sale of the property that is leased or rented.  A person who leases or rents property shall also collect the tax imposed by this section on the separate retail sale of the property.
(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.  A tax at the general rate of tax is levied on the gross receipts derived by these retailers from the rental of any 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 engaged in the business of operating a dry cleaning, pressing, or hat-blocking establishment, a laundry, or any similar business, engaged in the business of renting clean linen or towels or wearing apparel, or any similar business, or engaged in the business of soliciting cleaning, pressing, hat blocking, laundering or linen rental business for any of these businesses, ”is considered a retailer under this Article.  A tax at the general rate of tax is levied on the gross receipts derived by these retailers from services rendered in engaging in any of the occupations or businesses named in this subdivision. The tax imposed by this subdivision does not apply to receipts derived from coin or token-operated washing machines, extractors, and dryers.  The tax imposed by this subdivision does not apply to gross receipts derived from services performed for resale by a retailer that pays the tax on the total gross receipts derived from the services.
(4a)	The rate of three percent (3%) applies to 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(e).  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 the person's own household personal property, is considered a retailer under this Article.  A tax at the general rate of tax is levied on the sales price of each article sold by the retailer at the flea market.  A person who leases or rents space to others at a flea market may not lease or rent this space unless the retailer requesting to rent or lease the space shows the license or a copy of the license required by this Article or other evidence of compliance.  A person who leases or rents space at a flea market shall keep records of retailers who have leased or rented space at the flea 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)	The rate of six and one-half percent (6 1/2%) applies to the gross receipts derived from providing toll telecommunications services or private telecommunications services as defined by G.S. 105-120(e) that both originate from and terminate in the State and are not subject to the privilege tax under G.S. 105-120.  Any business entity that provides these services is considered a retailer under this Article.  This subdivision does not apply to telephone membership corporations as described in Chapter 117 of the General Statutes.
(b)	The tax levied in this section shall be collected from the retailer 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. The tax levied in this section is in addition to all other taxes whether levied in the form of excise, license or privilege or other taxes.
(c)	Any person who engages or continues 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 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 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 the license, if the 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 ceases to be engaged in any business for which a privilege tax is imposed by this Article, and who remains 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 void.  The burden of proof after such period shall be upon the taxpayer to show that he did engage in such business 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. 2.  G.S. 105-164.6(b) reads as rewritten:
"(b)	An excise tax at the general rate of tax set in G.S. 105-164.4 is imposed on the purchase price of tangible personal property purchased inside or outside the State that becomes a part of a building or other structure in the State.  The purchaser of the property is liable for the tax.  If the purchaser is a contractor, the contractor and owner are jointly and severally liable for the tax; if the purchaser is a subcontractor, the subcontractor and contractor are jointly and severally liable for the tax.  The liability of an owner or contractor who did not purchase the property is satisfied if the purchaser delivers to the owner or contractor before final settlement between them an affidavit certifying that the tax has been paid."
Sec. 3.  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 
					under this Article, the Secretary shall prescribe tables that compute the tax due on sales by rounding off the amount of tax due to the nearest whole cent.  The Secretary shall issue a separate table for each rate of tax that may apply to a sale, including the general rate established in G.S. 105-164.4, preferential rates, and combined State and local rates.  Use of the tables prescribed by the Secretary does not relieve a retailer of liability for the applicable rate of tax due on the gross receipts or net taxable sales of the retailer."
Sec. 4.  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 general rate of tax set in G.S. 105-164.4. However, ‘services rendered' shall not include those services which have been taxed pursuant to G.S. 105-164.4(4), or to 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. 5.  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 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,' 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. 6.  G.S. 105-467 reads as rewritten:
"§ 105-467.  Scope of 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 general rate of sales tax imposed by the State under G.S. 105-164.4(a)(1) and (4b);
(2)	The gross receipts derived from the lease or rental of tangible personal property when the lease or rental of the property is subject to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(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 general rate of sales tax imposed by the State under G.S. 105-164.4(a)(3); and
(4)	The gross receipts derived from services rendered by laundries, dry cleaners, and other businesses now subject to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(4).
The sales tax authorized by this Article does not apply to sales that are taxable by the State under G.S. 105-164.4 but are not specifically included in subdivisions (1) through (4) of this section.
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 apply 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. 7.  G.S. 105-468 reads as rewritten:
"§ 105-468. Scope of 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 it is not sold but used, consumed or stored for use or consumption in the taxing county, except that no tax shall be imposed upon tangible personal property when the property would be taxed by the State at a rate other than the general rate of tax set in G.S. 105-164.4 if it were taxable under G.S. 105-164.6.
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, 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 the purchaser's liability for the use tax shall be extinguished only upon 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 tangible personal property by the purchaser, 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, the tax paid 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.  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.  The use tax levied under this Article is not 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. 8.  G.S. 105-470, 105-485, and 105-500 and Article 41 of Chapter 105 of the General Statutes are repealed.
Sec. 9.  Chapter 1096 of the 1967 Session Laws is amended as follows:
(1)	The title is amended by deleting the phrase "THREE PER CENT SALES AND USE TAX.”and substituting the phrase "SALES AND USE TAX AT THE GENERAL STATE RATE OF TAX SET IN G.S. 105-164.4."
(2)	Section 4 is amended by deleting the phrase "three per cent (3%)”each time it appears and substituting the phrase "general rate of".
(3)	Section 5 is amended by deleting the phrase "of other than three percent (3%)”and substituting the phrase "other than the general rate of tax set in G.S. 105-164.4".
(4)	Section 7 is repealed.
(5)	Section 10.1(d) is amended by deleting the phrase "Items on Which the State Now Imposes a Three Percent (3%) Sales Tax.”and substituting the phrase "Scope."
Sec. 10.  (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.
(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.
(c)	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.
Sec. 11.  The provisions of this act increasing the State sales and use tax from three percent (3%) to four percent (4%) do not apply to construction materials purchased to fulfill a lump sum or unit price contract entered into or awarded before the effective date of the increase or entered into or awarded pursuant to a bid made before the effective date of the increase when the construction materials would otherwise be subject to the State sales and use tax at the rate of four percent (4%).
Sec. 12.  To pay for the additional costs of implementing the provisions of this act in a timely manner, the Department of Revenue shall retain the sum of four hundred fifty thousand dollars ($450,000) from collections received by the Department during July 1991 under Article 5 of Chapter 105 of the General Statutes.
Sec.  13.  This act becomes effective July 8, 1991, and applies to sales made on or after that date.