GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 504

Short Title:  Highway Use Tax on Leased Vehicles.	(Public)

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Sponsors: Representatives Robinson; and Buchanan.

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Referred to:  Finance.

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March 20, 1995

A BILL TO BE ENTITLED
AN ACT TO SUBTRACT ANY TRADE-IN ALLOWANCE IN CALCULATING THE ALTERNATIVE HIGHWAY USE TAX ON LEASED VEHICLES AND TO ALLOW A CREDIT AGAINST THE HIGHWAY USE TAX FOR ANY ALTERNATIVE HIGHWAY USE TAX PAID ON A LONG-TERM LEASE OF THE SAME VEHICLE BY THE PURCHASER OR A RELATED PERSON.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-187.5 reads as rewritten:
"§ 105-187.5.  Alternate tax for those who rent or lease motor vehicles.
(a)	Alternate Tax. – A retailer who is engaged in the business of leasing or renting motor vehicles may elect not to pay the tax imposed by this Article at the rate set in G.S. 105-187.3 when applying for a certificate of title for a motor vehicle purchased by the retailer for lease or rental.  A retailer who makes this election shall pay a tax on the gross receipts of the lease or rental of the vehicle.  Like the tax imposed by G.S. 105-187.3, this alternate tax is a tax on the privilege of using the highways of this State.  The tax is imposed on a retailer, but is to be added to the lease or rental price of a motor vehicle and thereby be paid by the person who leases or rents the vehicle.
	(b)	Rate; Scope. – The tax rate on the gross receipts from the short-term lease or rental of a motor vehicle is eight percent (8%) and the tax rate on the gross receipts from the long-term lease or rental of a motor vehicle is three percent (3%).  The maximum tax in G.S. 105-187.3(a) applies to a continuous lease or rental of a motor vehicle to the same person.
Gross receipts does not include the amount of any allowance given by the lessor for a motor vehicle taken in trade as a partial payment on the lease or rental price.
(c)	Election. – A retailer who elects to pay tax on the gross receipts of the lease or rental of a motor vehicle shall make this election when applying for a certificate of title for the vehicle.  To make the election, the retailer shall complete a form provided by the Division giving information needed to collect the alternate tax based on gross receipts.  Once made, an election is irrevocable.
	(d)	Administration. – The Division shall notify the Secretary of Revenue of a retailer who makes the election under this section.  A retailer who makes this election shall report and remit to the Secretary the tax on the gross receipts of the lease or rental of the motor vehicle.  The Secretary shall administer the tax imposed by this section on gross receipts in the same manner as the tax levied under G.S. 105-164.4(a)(2).  The administrative provisions and powers of the Secretary that apply to the tax levied under G.S. 105-164.4(a)(2) apply to the tax imposed by this section.  In addition, the Division may request the Secretary to audit a retailer who elects to pay tax on gross receipts under this section.  When the Secretary conducts an audit at the request of the Division, the Division shall reimburse the Secretary for the cost of the audit, as determined by the Secretary.  In conducting an audit of a retailer under this section, the Secretary may audit any sales of motor vehicles made by the retailer."
Sec. 2.  G.S. 105-187.7 reads as rewritten:
"§ 105-187.7.  Credits.
(a)	Tax Paid in Another State. – A person who, within 90 days before applying for a certificate of title for a motor vehicle on which the tax imposed by this Article is due, has paid a sales tax, an excise tax, or a tax substantially equivalent to the tax imposed by this Article on the vehicle to a taxing jurisdiction outside this State is allowed a credit against the tax due under this Article for the amount of tax paid to the other jurisdiction.  The credit may not reduce the person's liability under this Article below the minimum forty-dollar ($40.00) tax. 
(b)	Tax Paid on Long-term Lease. –  A person who, at the end of a long-term lease, buys a motor vehicle that was rented or leased to a related person under that long-term lease is allowed a credit against the tax due under this Article for the amount of tax paid by the related person under G.S. 105-187.5 on the vehicle.  For the purpose of this subsection, a related person is the same person, the person's spouse, parent, child, stepparent, or stepchild or, in the case of a corporation, a shareholder, an officer, a director, or an employee of that corporation."
Sec. 3.  This act becomes effective October 1, 1995, and applies to certificates of title issued on or after that date.