GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

S	2 

SENATE BILL 1035
Finance Committee Substitute Adopted 5/22/97

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

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Sponsors:

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Referred to:  Appropriations.

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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 (c) 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
Thereafter	2%	$40	$  750
	3%	$50	$1,000
The discount for each location may be deducted only from the tax paid with regard to that location.
(b)	Retailer Group. – For the purposes of this section, a retailer group includes all retail establishments that have one of the following relationships with one another:
(1)	One corporation owns, directly or indirectly, at least eighty percent (80%) of the voting stock of the others.
(2)	At least eighty percent (80%) of the voting stock of the corporation is owned, directly or indirectly, by the same interests.
(3)	In the case of establishments that are not incorporated, the establishments are under the same general management, supervision, or ownership.
(c)	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. 105-187.5(d) reads as rewritten:
"(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. The merchant's discount provided in G.S. 105-164.21 does not apply to this section.
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."
Section 7.  G.S. 105-187.17 reads as rewritten:
"§ 105-187.17.  Administration.
(a)	Retail Sale or Use. – The privilege tax this Article imposes on a tire retailer who sells new tires at retail is an additional State sales tax and the excise tax this Article imposes on the storage, use, or consumption of a new tire in this State is an additional State use tax.  Except as otherwise provided in this Article, these taxes shall be collected and administered in the same manner as the State sales and use taxes imposed by Article 5 of this Chapter.  As under Article 5 of this Chapter, the additional State sales tax paid when a new tire is sold is a credit against the additional State use tax imposed on the storage, use, or consumption of the same tire.
(b)	Wholesale Sale or Use. – The privilege tax this Article imposes on a tire retailer and on a tire wholesale merchant who sell new tires for placement in this State on a vehicle offered for sale, lease, or rental is a tax on the wholesale sale of the tires.  This tax and the excise tax this Article imposes on a new tire purchased for placement in this State on a vehicle offered for sale, lease, or rental shall, to the extent practical, be collected and administered as if they were additional State sales and use taxes.  The privilege tax paid when a new tire is sold for placement on a vehicle offered for sale, lease, or rental is a credit against the use tax imposed on the purchase of the same tire for placement in this State on a vehicle offered for sale, lease, or rental.
(c)	Discount. – The merchant's discount provided in G.S. 105-164.21 does not apply to this Article."
Section 8.  G.S. 105-187.22 reads as rewritten:
"§ 105-187.22.  Administration.
The privilege tax this Article imposes on a white goods retailer is an additional State sales tax and the excise tax this Article imposes on the storage, use, or consumption of a new white good in this State is an additional State use tax.  Except as otherwise provided in this Article, these taxes shall be collected and administered in the same manner as the State sales and use taxes imposed by Article 5 of this Chapter.  As under Article 5 of this Chapter, the additional State sales tax paid when a new white good is sold at retail is a credit against the additional State use tax imposed on the storage, use, or consumption of the same white good. The merchant's discount provided in G.S. 105-164.21 does not apply to this Article."
Section 9.  G.S. 105-164.21(a), as amended by Section 3 of this act, reads as rewritten:
"(a)	Amount. – Except as provided in subsection (c) 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 a discount of two percent (2%), up to the following maximum discounts:
(1)	Forty dollars ($40.00) per month for each place of business at a separate location.
(2)	For taxpayers who are not required to report on a semimonthly basis, seven hundred fifty dollars ($750.00) per month for each retailer group.
(3)	For taxpayers who are required to report on a semimonthly basis, three hundred seventy-five dollars ($375.00) 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."
Section 10.  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 8 of this act become effective January 1, 1998, and apply to returns filed on or after that date.  Section 9 of this act becomes effective January 1, 1999, and applies to returns filed on or after that date.  The remainder of this act is effective when it becomes law.