GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	2 

HOUSE BILL 1079
Second Edition Engrossed 5/16/96

Short Title:  Repeal State Food Tax/Freeze Hiring.	(Public)

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Sponsors: Representatives Hayes; Aldridge, Allred, Arnold, Baker, Bowie, J. Brown, Buchanan, Cansler, Capps, Carpenter, Cocklereece, Creech, Culp, Cummings, Davis, Decker, Dickson, Eddins, Edwards, Esposito, Gardner, Gray, Hiatt, Hill, Holmes, Ives, Justus, Linney, McComas, McCombs, Mitchell, Morgan, Nichols, Pate, Preston, Pulley, Rayfield, Reynolds, J. Robinson, Russell, Sexton, Sharpe, Sherrill, Shubert, Thompson, Weatherly, C. Wilson, and G. Wilson.

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Referred to:  Finance.

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May 13, 1996

A BILL TO BE ENTITLED
AN ACT TO PHASE OUT OVER FOUR YEARS THE FOUR PERCENT STATE SALES TAX ON FOOD AND REDUCE THE SIZE OF STATE GOVERNMENT BY AUTHORIZING THE GOVERNOR TO FREEZE HIRING FOR STATE EMPLOYEES OTHER THAN EDUCATION, PUBLIC SAFETY, PUBLIC HEALTH, AND OTHER APPROPRIATE POSITIONS.
The General Assembly of North Carolina enacts:
Section 1.  Effective January 1, 1997, through December 31, 1999, G.S. 105-164.4(a) is amended by adding a new subdivision to read:
"(1f)	The following rates apply to the sales price of food and other items that would be exempt from the tax imposed by this Article if they were purchased with coupons issued under the Food Stamp Program, 7 U.S.C. § 51:
Effective Dates	Rate
January 1, 1997, through December 31, 1997 – three percent (3%)
January 1, 1998, through December 31, 1998 – two percent (2%)
January 1, 1999, through December 31, 1999 – one percent (1%)."
Sec. 2.  Effective January 1, 2000, Article 5 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-164.13B.  Food exempt from tax.
The taxes imposed by this Article do not apply to food and other items that are not otherwise exempt pursuant to G.S. 105-164.13 but would be exempt pursuant to G.S. 105-164.13 if purchased with coupons issued under the Food Stamp Program, 7 U.S.C. § 51."
Sec. 3.  Article 1 of Chapter 143 of the General Statutes is amended by adding a new section to read:
"§ 143-10.2A.  Moratorium on State employee hiring; abolishing vacant positions.
(a)	The Governor may, by executive order, institute a moratorium on filling vacant positions in State government.  The Governor may exclude from the moratorium positions in the State's public school system funded by way of State aid to local public school units, positions in law enforcement and other positions directly related to public safety, positions directly related to public health, and other appropriate positions designated by the Governor.
(b)	The vacant positions subject to a moratorium instituted pursuant to this section may be deleted from future State budgets submitted by the Governor and approved by the General Assembly.
(c)	The Office of State Budget and Management shall be responsible for the monitoring and oversight of the moratorium, as directed by the Governor."
Sec. 4.  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, 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 will be levied.
The special election shall be held under the same rules 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 the 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.  The question presented on the ballot shall be 'FOR one percent (1%) local sales and use tax on items subject to State sales and use tax at the general State rate and on food' or  'AGAINST one percent (1%) local sales and use tax on items subject to State sales and use tax at the general State rate and on food'.
The county board of elections shall fix the date of the special election, except that the special election shall not be held on the date or within 60 days of any biennial election for county officers, nor within one year from the date of the last preceding special election under this section."
Sec. 5.  G.S. 105-467 reads as rewritten:
"§ 105-467.  Scope of sales tax.
The sales tax that may be imposed under this Article is limited to a tax at the rate of one percent (1%) of the following:
(1)	The sales price of tangible personal property subject to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(1) and (a)(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 other accommodations subject to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(3).
(4)	The gross receipts derived from services rendered by laundries, dry cleaners, and other businesses subject to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(4).
(5)	The sales price of food that is not otherwise exempt from tax pursuant to G.S. 105-164.13 but would be exempt from the State sales and use tax pursuant to G.S. 105-164.13 if it were purchased with coupons issued under the Food Stamp Program, 7 U.S.C. § 51.
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 this section.
The State exemptions and exclusions contained in G.S. 105-164.13 and the State refund provisions contained in G.S. 105-164.14 apply to the local sales and use tax authorized to be levied and imposed under this Article.  A taxing county may not allow an exemption, exclusion, or refund that is not allowed under the State sales and use tax.
The local sales tax authorized to be imposed and levied under this Article applies to taxable transactions by retailers whose place of business is located within the taxing county.  For the purpose of this Article, the situs of a transaction is the location of the retailer's place of business."
Sec. 6.  G.S. 105-468 reads as rewritten:
"§ 105-468.  Scope of use tax.
The use tax authorized by this Article is a tax at the rate of one percent (1%) of the cost price of each item or article of tangible personal property that is not sold in the taxing county but is used, consumed, or stored for use or consumption in the taxing county.  The tax applies to the same items that are subject to tax under G.S. 105-467.
Every retailer who is engaged in business in this State and in the taxing county and is required to collect the use tax levied by G.S. 105-164.6 shall collect the one percent (1%) use tax when the property is to be used, consumed, or stored in the taxing county. 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, 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 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 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. 7.  The first paragraph of Section 4 of Chapter 1096 of the 1967 Session Laws, as amended, is amended as follows:
(1)	By deleting the word "and" before subdivision (4).
(2)	By changing the period at the end of subdivision (4) to a semicolon and adding the word "and".
(3)	By adding a new subdivision to read:
"(5)	The sales price of food and other items that are not otherwise exempt from tax pursuant to G.S. 105-164.13 but would be exempt from the State sales and use tax pursuant to G.S. 105-164.13 if purchased with coupons issued under the Food Stamp Program, 7 U.S.C. § 51."
Sec. 8.  Section 5 of Chapter 1096 of the 1967 Session Laws is amended by deleting the first sentence of that section and substituting the following sentences to read:
"The use tax that Mecklenburg County may impose under this division is a tax at the rate of one percent (1%) of the cost price of each item or article of tangible personal property that is not sold but is used, consumed, or stored for use or consumption in Mecklenburg County.  The tax applies to the same items that are subject to tax under Section 4 of this act."
Sec. 9.  Approval under Article 39, 40, or 42 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 local sales and use taxes on items subject to State sales and use tax at the general State rate constitutes approval of local sales and use taxes on food.
Sec. 10.  Except as otherwise provided in this act, this act becomes effective January 1, 1997, and applies to sales made on or after that date.  Section 1 of this act is repealed effective January 1, 2000.
Sec. 11.  If the State budget savings from a moratorium instituted by the Governor pursuant to G.S. 143-10.2A are not sufficient to offset the loss of revenue resulting from the tax law changes made by this act, the Governor shall submit as part of the Governor's proposed budget sufficient permanent position reductions to ensure that the full revenue loss is offset.
Sec. 12.  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.  If any provision of this act or its application is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provisions or application, and to this end the provisions of this act are severable.