GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

S	1 

SENATE BILL 1035

Short Title:  Modify Food Tax/Merchant's Discount.	(Public)

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Sponsors: Senators Kerr and Kincaid.

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Referred to:  Finance.

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April 21, 1997

A BILL TO BE ENTITLED
AN ACT TO REVISE THE DEFINITION OF FOOD FOR SALES TAX PURPOSES AND ALLOW A PERCENTAGE DISCOUNT TO MERCHANTS FOR COLLECTING STATE SALES AND USE TAXES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-164.4(5) reads as rewritten:
"(5)	The rate of three percent (3%) applies to the sales price of food that meets the following conditions:
a.	It is sold at a retail food business qualified under subsection (d) of this section.
b.	It is not otherwise exempt pursuant to G.S. 105-164.13 but would be exempt pursuant to G.S. 105-164.13 if it were purchased with coupons issued under the Food Stamp Program, 7 U.S.C. § 51."
Section 2.  G.S. 105-164.4 is amended by adding a new subsection to read:
"( d)	For the purpose of this Article, a retailer is a qualified retail food business if either (i) it sells all of the staple food items listed in this subsection or (ii) more than eighty percent (80%) of its gross sales are sales of one or more staple food items listed in this subsection.  The following are staple food items for the purpose of this subsection:
(1)	Raw meat.
(2)	Raw poultry.
(3)	Raw fish.
(4)	Bread.
(5)	Breadstuffs.
(6)	Cereal.
(7)	Vegetables.
(8)	Fruit.
(9)	Fruit or vegetable juices.
(10)	Dairy products.
A retailer's sales for the most recent 12-month period shall be considered in determining whether the retailer is a qualified retail food business.  If the retailer has been in business less than 12 months, the period the retailer has been in business shall be considered.  If the retailer has been in business for less than one reporting period, the determination shall be based on the retailer's expected sales for the first reporting period."
Section 3.  G.S. 105-164.21 is reenacted and rewritten to read:
"§ 105-164.21.  Merchant's discount.
(a)	Amount. – Except as provided in subsection (b) of this section, a retailer who pays the retail sales or use tax imposed by this Article may deduct from the amount of the tax paid the applicable percentage discount provided in the table below, up to the following maximum discounts:
(1)	The applicable per-location cap per month for each place of business at a separate location.
(2)	For taxpayers who are not required to report on a semimonthly basis, the applicable retailer group cap per month for each retailer group.
(3)	For taxpayers who are required to report on a semimonthly basis, one-half of the applicable retailer group cap per semimonthly period for each retailer group.
Returns Filed	Percentage	Per-Location	Retailer Group
Discount	Cap	Cap
In 1998	1%	$30	$  500
In 1999	2%	$40	$  750
Thereafter	3%	$50	$1,000
The discount for each location may be deducted only from the tax paid with regard to that location.  For the purposes of this section, a retailer group includes all retail establishments that have one of the following relationships with one another: (i)	one corporation owns, directly or indirectly, at least eighty percent (80%) of the voting stock of the others; (ii) at least eighty percent (80%) of the voting stock of the corporation is owned, directly or indirectly, by the same interests; or (iii) in the case of establishments that are not incorporated, the establishments are under the same general management, supervision, or ownership.
(b)	Restrictions. – The Secretary may deny a retailer the benefit of this section for failure to pay the full tax when due as well as in cases of fraud, evasion, or failure to keep accurate and clear records as required by this Article.  In order to receive the discount provided in this section, a retailer must deduct the discount when it remits the tax to the Department of Revenue.  A utility may not deduct the discount provided in this section on sales of electricity, piped natural gas, or telecommunications services."
Section 4.  G.S. 105-474 reads as rewritten:
"§ 105-474. Administration and construction of Article.
This Article shall be harmonized with the North Carolina Sales and Use Tax Act to the extent practical.  The merchant's discount provided in G.S. 105-164.21 does not apply to this Article.  The remaining provisions of Articles 5 and 9 of this Chapter apply to this Article to the extent they are consistent with this Article.
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Section 5.  The first sentence of Section 10 of Chapter 1096 of the 1967 Session Laws is amended by adding after the word "Act" the phrase ", other than G.S. 105-164.21,".
Section 6.  G.S. 105-164.21(a), as amended by Section 3 of this act, reads as rewritten:
"(a)	Amount. – Except as provided in subsection (b), a retailer who pays the retail sales or use tax imposed by this Article may deduct from the amount of the tax paid a discount of three percent (3%), up to the following maximum discounts:
(1)	Fifty dollars ($50.00) per month for each place of business at a separate location.
(2)	For taxpayers who are not required to report on a semimonthly basis, one thousand dollars ($1,000) per month for each retailer group.
(3)	For taxpayers who are required to report on a semimonthly basis, five hundred dollars ($500.00) per semimonthly period for each retailer group.
														The discount for each location may be deducted only from the tax paid with regard to that location.  For the purposes of this section, a retailer group includes all retail establishments that have one of the following relationships with one another: (i)	one corporation owns, directly or indirectly, at least eighty percent (80%) of the voting stock of the others; (ii) at least eighty percent (80%) of the voting stock of the corporations is owned, directly or indirectly, by the same interests; or (iii) in the case of establishments that are not incorporated, the establishments are under the same general management, supervision, or ownership."
Section 7.  Sections 1 and 2 of this act become effective July 1, 1997, and apply to sales made on or after that date.  Sections 3 through 5 of this act become effective January 1, 1998, and apply to returns filed on or after that date.  Section 6 of this act becomes effective January 1, 2000, and applies to returns filed on or after that date.  The remainder of this act is effective when it becomes law.