Tax guide

              North Carolina
Tax Guide
2007
Office of State Budget and Management
20320 Mail Service Center
Raleigh, NC 27699- 0320
919/ 807- 4700 PREFACE
The Office of State Budget and Management presents the North Carolina Tax Guide. The Guide provides an overview of North Carolina's tax structure including General Fund, Highway Fund, Highway Trust Fund, and local government taxes. The information contained herein is intended for state lawmakers and planners, the business community, public interest groups, and individuals. The North Carolina Tax Guide is not available in hard copy. If further information is required, please contact this office.
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TABLE OF CONTENTS
PART I. INTRODUCTION
Overview....................................................................................................................... .................. 2
Tax Burden......................................................................................................................... ............. 3
Chart 1. Tax Collections Received By North Carolina Governments ( 2005- 06)............................ 4
Chart 2. North Carolina State Tax Collections ( 2005- 06)............................................................... 5
PART II. GENERAL FUND TAXES
General Fund Taxes......................................................................................................................... 7
Chart 3. North Carolina General Fund Tax Collections ( 2005- 06)................................................ 7
Alcoholic Beverage Tax.................................................................................................................. 8
Cigarette/ Tobacco Tax................................................................................................................... 12
Corporate Income Tax................................................................................................................... 14
Estate Tax............................................................................................................................ .......... 18
Franchise Tax............................................................................................................................ .... 20
Freight Car Tax............................................................................................................................ . 23
Gift Tax............................................................................................................................ ............. 24
Individual Income Tax................................................................................................................... 26
Insurance Tax............................................................................................................................ .... 30
Manufacturing Tax......................................................................................................................... 32
Piped Natural Gas Tax................................................................................................................... 33
Privilege License Tax.................................................................................................................... 35
Sales and Use Tax.......................................................................................................................... 37
PART III. HIGHWAY FUND TAXES
The Highway Fund........................................................................................................................ 42
Chart 4. North Carolina Highway Fund Tax Collections ( 2005- 06)............................................ 43
Dealer and Manufacturer License Fees.......................................................................................... 44
Driver's License Fees..................................................................................................................... 46
Financial Security Restoration Fees............................................................................................... 49
Gasoline Inspection Tax................................................................................................................ 50
International Registration Plan...................................................................................................... 52
Motor Fuels Excise Tax................................................................................................................. 54
Overweight/ Oversize Permits........................................................................................................ 58
Penalties...................................................................................................................... .................. 59
Miscellaneous Registration Fees.................................................................................................... 61
Safety Equipment Process Fees..................................................................................................... 63
Staggered Registration Fees........................................................................................................... 65
Truck License Plate Fees............................................................................................................... 77
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PART IV. HIGHWAY TRUST FUND TAXES
The Highway Trust Fund............................................................................................................... 70
Chart 5. North Carolina Highway Trust Fund Tax Collections ( 2005- 06)................................... 71
Highway Use Tax.......................................................................................................................... 72
Lien Recording Fees...................................................................................................................... 74
Motor Fuels Excise Tax................................................................................................................. 75
Title and Registration Fees............................................................................................................ 78
PART V. LOCAL GOVERNMENT TAXES
Local Government Tax Revenues.................................................................................................. 81
Chart 6. North Carolina Tax Collections Received by Local Government ( 2005- 06)................. 82
Excise Tax on Beer and Wine - Local Share................................................................................. 83
Excise Tax on Conveyances.......................................................................................................... 85
Land Transfer Tax.......................................................................................................................... 87
Liquor By- The- Drink Tax.............................................................................................................. 88
Prepared Meals Tax....................................................................................................................... 89
Privilege License Tax.................................................................................................................... 91
Property Tax............................................................................................................................ ...... 92
Room Occupancy Tax.................................................................................................................... 95
Sales and Use Tax.......................................................................................................................... 96
Scrap Tire Disposal Tax................................................................................................................. 98
Utility Excise Tax.......................................................................................................................... 99
White Goods Disposal Tax.......................................................................................................... 101
PART VI. COMPARISON OF NORTH CAROLINA TAX COLLECTIONS
WITH THOSE OF OTHER STATES
Table 1. Level and Percentage Distribution of State and Local Tax Collections by Source for 2004- 2005....................................................................................................... 103
Table 2. State Ranking of State and Local Tax Burden, Per Capita and Percent Personal Income, for 2004- 05................................................................................................ 105
Table 3. State and Local Tax Collections, Per Capita and as a Percent of
Personal Income, for the United States, the Eleven Most Populated States, and the Southeast, 2004- 05................................................................................................................. 107
Table 4. Percentage Distribution of State and Local Taxes by Type of Tax for the United States, Eleven Most Populated States, the Southeast, and North Carolina, 2004- 05.................................................................................................................. 109
Table 5. Per Capita State and Local Tax Collections by Type of Tax for the United States, Eleven Most Populated States, the Southeast, and North Carolina, 2004- 05........................ 110
Table 6. State and Local Tax Collections as a Percent of Personal Income by Type of Tax for the United States, Eleven Most Populated States, the Southeast, and North Carolina for 2004- 05............................................................................................. 110 PART I
INTRODUCTION
OVERVIEW
The Tax Guide is designed to give the reader an overview of the tax structure of both state and local governments of North Carolina. It contains a concise summary of each North Carolina tax law, a statement of the tax calendar, and the growth and distribution of tax collections. Whenever possible, comparisons of North Carolina tax laws with those of other states are presented.
The Tax Guide consists of seven sections. Part I is the Introduction. The overall scope of the Tax Guide is discussed in this section, along with an explanation of tax burden. Summaries of the tax laws governing North Carolina's General Fund, Highway Fund, Highway Trust Fund, and local government taxes follow in Parts II, III, IV and V.
In the last section, Part VI, an analysis is given of the total state and local tax burden in North Carolina in comparison to that of other states. Tax burdens are evaluated on a per capita and percentage of personal income basis. Special emphasis is made to compare North Carolina with the six southeastern states and the eleven most populated states.
For information on recent tax legislation, see the 2006 Legislative Overview at: http:// www. ncga. state. nc. us/ FiscalResearch/
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TAX BURDEN
Tax burden measures the impact of a tax on the purchasing power of an individual or a business. An understanding of tax burden is important in evaluating who pays a tax, how much is paid, and in comparing tax efforts among different states.
Tax burden is the amount of sacrifice individuals make when paying their taxes. In its simplest form, tax burden can be measured in terms of the number of dollars of an individual's income that must be dedicated to tax payments. The more dollars an individual must sacrifice the greater the tax burden.
Two common measures of tax burden are per capita tax payments and taxes paid as a percentage of personal income. The per capita tax payment is the average amount of taxes paid by each individual. It is found by dividing total state and local tax payments of a state by the population of the state.
EXAMPLE
The population of State A is 100. The state and local tax burden of all the tax payers in State A is $ 50,000. State B has a population of 75 citizens who have a combined state and local tax burden of $ 30,000. The per capita tax payments in each state are determined as follows:
Per Capita Tax Payments = Total State and Local Taxes Paid = $ 50,000 = $ 500
( State A) Total State Population 100
Per Capita Tax Payments = Total State and Local Taxes Paid = $ 30,000 = $ 400
( State B) Total State Population 75
Taxes paid as a percentage of personal income are found by dividing the total amount of state and local taxes paid by the total state personal income. For instance, suppose the citizens of State A have a total income of $ 1,000,000 while the citizens of State B have a total income of $ 400,000. Taxes paid as a percentage of personal income are found as shown below:
Taxes Paid as a Percentage of = Total State and Local Taxes Paid = $ 50,000 = 5%
Personal Income ( State A) Gross State Personal Income $ 1,000,000
Taxes Paid as a Percentage of = Total State and Local Taxes Paid = $ 40,000 = 10%
Personal Income ( State B) Gross State Personal Income $ 400,000
Taxes paid as a percentage of personal income are a better measure of tax burden than per capita tax payments. In the above example, the average citizen in State A paid more taxes than the average citizen in State B. Citizens in State A had a higher per capita tax burden. However, since the average income of citizens in State A was much higher than that of State B, they sacrificed a smaller portion of their income in tax payments. Obviously, their tax burden in terms of real sacrifice ( amount of private consumption given up to pay taxes) was less. The
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concept of tax burden is frequently used in Part VII to analyze the tax effort of citizens of North Carolina compared to the tax burden of citizens of other states.
Local Taxes32% State Taxes68% CHART 1STATE AND LOCAL TAX COLLECTIONS( 2006- 07) State Taxes $ 21,624889358Local Taxes 10,291,150,722 ---------------------- Total State and Local Taxes $ 31,916,040,080
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General Fund87% Highway Fund8% Highway Trust Fund5% CHART 2NORTH CAROLINA STATE TAX COLLECTIONS ( 2006- 07) General Fund $ 18,713,040,329 Highway Fund 1,800,128,085Highway Trust Fund 1,111,720,944 ---------------------------- Total State Tax Revenue $ 21,624,889,358
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PART II
GENERAL FUND TAXES
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GENERAL FUND TAXES
General Fund tax revenues are used to finances state administered programs such as education, public health, public safety, and the general services of state government.
The General Fund receives support from twelve primary sources. An income tax is levied on individuals and businesses if some or all of their income is derived from North Carolina sources during the tax year. Other business taxes, such as the franchise tax and privilege license taxes, are levied for the right to do business in and be protected under the revenue laws of this state. Consumption related taxes, such as an excise tax, serve to control the consumption and distribution of controlled substances. The sales tax is levied on most retail transactions. The use tax applies when tangible personal property is purchased outside the state for consumption within the state. The sales and use tax also applies to the lease of tangible personal property. An estate tax is levied on the value of all property transferred at death. The gift tax is levied when someone gives away money or an asset without receiving fair market value.
Each summary outlines the subject being taxed, the tax rate or rates, total collections, any distributions made from the collections, and any exemptions. A comparison with similar taxes from other states is made for most schedules and is updated as often as national data is available. Individual Income56% Franchise3% Sales and Use27% Other7% Corporate Income8% CHART 3NORTH CAROLINA GENERAL FUND TAX COLLECTIONS ( 2006- 07) Individual Income $ 10,507,966,531Corporate Income 1,451,399,198Sales and Use 4,995,570,841Franchise 531,412,140Other 1,226,691,619 ---------------------- Total $ 18,713,040,329 7
ALCOHOLIC BEVERAGE TAX
Alcoholic beverage taxes are levied on beer, fortified and unfortified wines, and spirituous liquor. Beer and wine are sold through retail outlets. The sale of spirituous liquor is administered through local ABC boards and sold only in local ABC stores. Alcoholic beverages can only be sold in those counties and cities for which such sales have been authorized.
ADMINISTERED BY
Department of Revenue and the Alcoholic Beverage Control Commission
Table 1
General Fund Excise Tax on Alcoholic Beverages
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
166,372,353
5.3
1.3
2000- 01
172,698,910
3.8
1.4
2001- 02
174,644,725
1.1
1.4
2002- 03
170,896,552
- 2.2
1.4
2003- 04
182,392,510
6.7
1.3
2004- 05
189,308,658
3.8
1.2
2005- 06
200,845,242
6.1
1.2
2006- 07
212,608,231
6.0
1.1
Note: Effective October 1, 2005, in addition to the excise tax levy of 25% on liquor sold
in ABC stores, the sale of spirituous liquor is subject to the combined sales and use tax rate
of 6.75%. { G. S. 105- 164.4( 7)}
BASE AND RATE
Wholesalers and importers remit the excise taxes on beer and wine. Local alcoholic beverage control boards remit the excise taxes on spirituous liquor.
{ G. S. 105- 113.80} Excise taxes on beer, wine, and spirituous liquors
•
Beer is taxed at a rate of 53.177 cents per gallon. ( Equivalent rate 5 cents / can)
•
Unfortified wine is taxed at 21 cents per liter.
•
Fortified wine is taxed at 24 cents per liter.
•
Spirituous liquor is taxed at 25% of case cost plus local board mark- up.
{ G. S. 18B- 804} Mark- up for local ABC Boards
An additional 3.5% levy on the retail price is allocated as part of ordinary profits of the ABC store to the respective localities where the ABC store is located. Similarly, an add- on tax of 5 cents and 1 cent ( mini bottle) per bottle of liquor sold in ABC stores is levied, with the revenue distributed to local governments in the same manner as profits from the ABC stores.
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By authorization of local elections, liquor “ by the drink” may be sold by qualified restaurants and clubs. Liquor sold by the drink in restaurants and clubs is subject to an additional tax of $ 20 per 4 liters. Liquor sold through a guest room cabinet is also taxed at $ 20 per 4 liters rate.
{ G. S. 18B- 902} Applications for Permits issued by NC Alcoholic and Beverage Control Commission:
•
To sell either malt beverages, fortified wine, or unfortified wine on premises - $ 400.
•
To sell either malt beverages, fortified wine, or unfortified wine off premises - $ 400.
•
Brown bagging permit for an establishment seating 50 or more - $ 400
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An establishment seating less than 50 - $ 200
•
Special occasion permit - $ 400
o
Limited special occasion permit - $ 50
•
Mixed beverage or guest room cabinet permit - $ 1,000
•
Culinary, winery special event, or mixed beverage catering permit - $ 200
•
Unfortified and fortified winery, limited winery, brewery, distillery, wine importer
•
and wholesaler, malt beverage importer and wholesaler, or bottler permit - $ 300
•
Fuel alcohol permit - $ 100
•
Salesman permit - $ 100
•
Vendor representative permit and certain special one- time permits - $ 100
•
Nonresident malt beverage vendor or nonresident wine vendor permit - $ 100
•
Liquor importer and bottler permit - $ 500
•
Special wine tasting permit for wineries - $ 300 and for retail establishments - $ 100.
LOCAL GOVERNMENT DISTRIBUTION
{ G. S. 105- 113.82} State, Local Government, and Special Earmark Revenue
Local governments, for which the sale of beer and wine has been authorized, receive 23.75% of the excise tax on malt beverages, 62% of the excise tax on unfortified wine, and 22% of the excise tax on fortified wine. The remaining revenue is deposited into the General Fund for general purposes.
{ G. S. 105- 113.81A} Revenue deposited in the General Fund is used for general purposes except for $ 500,000 in excise tax collections on unfortified wines and fortified wine bottled in North Carolina. This revenue is allocated to the Department of Commerce for the promotion of N. C. grapes. Of the $ 20 per four liters levy on alcohol used for liquor by- the- drink sales, $ 10 goes to the General Fund, $ 1 to the Department of Human Resources, and $ 9 to the local governments where the sales took place. In addition, the 5 cents and the 1 cent per bottle “ add- on” tax on all alcohol sold in Alcoholic Beverage Control ( ABC) stores goes to county commissioners for rehabilitation of alcoholics.
{ G. S. 18B- 805( 4) & C ( 1)} Local governments that have approved the sale of spirituous liquor receive a portion of the profits. The local ABC Board pays quarterly to the general fund of the county or city for which the board is established the sum of 3.5% mark- up, 1 cent per 50 milliliter bottle or less, and 5 cents on each bottle greater than 50 milliliter. The remaining revenue is deposited into the General Fund for general purposes.
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TAX CALENDAR
{ G. S. 105- 113.83} Wholesalers and importers of beer and wine, and ABC Boards must file returns including monthly tax payments by the fifteenth day of the month for the previous month’s activities.
COMPARISON WITH OTHER STATES
All fifty states levy alcoholic beverage taxes. Eighteen states, including North Carolina, sell spirituous liquor only in state- licensed stores. Tax rates vary considerably as each state enacts different tax rates on beer, wine, and spirituous liquors. Because of the wide variety of laws, it is difficult to make an exact comparison of North Carolina’s laws with those of other states. However, the following comparison will give the reader a good approximation of the relative tax burdens.
The latest complete survey on the taxation of alcoholic beverages is for calendar year 2004 and consists of the combined revenue per wine gallon from all state and local taxes, fees, and levies on alcoholic beverages.
Taxes on beer ranged from $ 0.11 per gallon to $ 1.85 per gallon. The average overall tax rate for the nation was $ 0.97 per gallon, while the average rate for the six southeastern states( 1) stood at $ 1.24 and $ 1.06 for the eleven most populated states( 2). North Carolina’s rate is $ 1.25 per gallon. North Carolina ranked twelfth in the nation, forth among the controlled states, third among the six southeastern states, and third among the eleven most populated states.
Taxes on wine ranged from $ 0.69 per gallon to $ 7.72 per gallon. The average overall tax rate for the nation was $ 2.56 per gallon, while the average rate for the six southeastern states stood at $ 3.39 and $ 3.10 for the eleven most populated states. North Carolina’s rate is $ 4.03 per gallon. North Carolina had the eighth highest tax rate in the nation, while first among the six southeastern states, third highest among the eleven most populated states and fifth among the control states.
Taxes on distilled spirits ranged from $ 3.85 per gallon to $ 31.67 per gallon. The average overall tax rate for the nation was $ 14.05 per gallon, while the average rate for the six southeastern states stood at $ 17.21 and $ 16.69 for the eleven largest states. North Carolina’s rate is $ 23.14 per gallon. North Carolina had the seventh highest combined tax rate in the nation, while second among the six southeastern states, third among the eleven most populated states, and seventh among the control states.
( 1)
Georgia, Kentucky, North Carolina, South Carolina, Tennessee, and Virginia.
( 2)
California, Georgia, Florida, Illinois, Michigan, Ohio, Pennsylvania, New Jersey, New York, North Carolina, Texas.
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Table 2
Revenue per Gallon from combined state and Local Tax Collections
STATES
BEER
WINE
SPIRITS
United States
$ 0.96
$ 2.56
$ 14.05
Six Southeastern States
1.24
3.39
17.21
Eleven Largest States
1.06
3.10
16.69
Surrounding States
Georgia
1.68
3.44
10.75
Kentucky
0.85
4.50
12.56
North Carolina
1.25
4.03
23.14
South Carolina
1.21
2.44
15.23
Tennessee
1.57
3.79
14.56
Virginia
0.93
3.25
27.04
Source: Distilled Spirits Council of the United States, Inc. " Public Revenues from Alcohol Beverages, 2004," Washington, D. C., January, 2006.
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CIGARETTE/ TOBACCO TAX
All tobacco products including cigarettes, pipe tobacco, and smokeless tobacco are subject to a state excise tax. This tax is levied on the sale or possession of tobacco products in the state by a distributor.
ADMINISTERED BY
Department of Revenue
Table 3
General Fund Excise Tax on Tobacco Products
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
44,852,542
- 4.9
0.4
1999- 00
43,663,205
- 2.7
0.4
2000- 01
42,025,877
- 3.8
0.3
2001- 02
41,531,347
- 1.2
0.3
2002- 03
41,998,713
1.1
0.3
2003- 04
43,732,769
4.1
0.3
2004- 05
42,981,044
- 1.7
0.3
2005- 06( 1)
171,636,758
300.0
1.0
2006- 07
241,174,320
41.0
1.3
Note: Prior to the legislative change effective July 1, 2006, the tax rate was 5 cents per pack.
BASE AND RATE
{ G. S. 105- 113.5} A tax rate of 35 cents per pack of 20 cigarettes is levied on distributors effective July 1, 2006. The rate per cigarette is 1.75 cents.
{ G. S. 105- 113.35} The excise tax levied on tobacco products other than cigarettes is 3%.
{ G. S. 105- 113.36} A $ 25 license fee is levied on wholesale dealers, and a $ 10 license fee is levied on retail dealers for each place where a wholesale or retail dealer makes tobacco products other than cigarettes, or receives or stores non- tax- paid tobacco products.
DISTRIBUTION
Revenue is deposited in the General Fund for general purposes.
TAX CALENDAR
{ G. S. 105- 113.37} Distributors, wholesalers, and retailer dealers file monthly returns with payment of tax by the twentieth of each month for the previous month's activity.
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COMPARISON WITH OTHER STATES
All states levy an excise tax on cigarettes. Tax rates, per pack of 20 cigarettes, range from 7 cents to $ 2.58 per pack. Municipalities in six states can levy additional cigarette taxes. The median tax for the nation was 80 cents per pack and North Carolina ranks 33rd in the nation with an excise tax rate of 35 cents per pack.
Table 4
Distribution of State Cigarette Tax Rates
January 1, 2007
Cents Per Pack
Number of States
Below 9 cents
1
10 cents to 49 cents
10
50 cents to 99 cents
19
100 cents to 149 cents
2
150 cents to 199 cents
12
Above 200 cents
6
Source: Federation of Tax Administrators. “ State Excise Tax Rates on Cigarettes”. Washington, DC. January 2007
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CORPORATE INCOME TAX
All corporations, both domestic and foreign, that do business in this state are required to file annual income tax returns unless exempt from the corporate income tax.
ADMINISTERED BY
Department of Revenue
Table 5
General Fund Corporate Income Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
848,509,669
21.9
7.1
1999- 00( 1)
903,241,974
6.5
7.3
2000- 01( 2)
406,315,086
- 49.0
3.7
2001- 02
409,322,540
- 11.1
3.3
2002- 03
840,499,824
105.3
3.7
2003- 04
776,964,847
- 7.6
5.6
2004- 05( 3)
1,193,529,164
53.6
7.7
2005- 06
1,204,102,940
.9
7.1
2006- 07
1,451,399,198
21.0
8.0
( 1)
A change in an accounting procedure resulted in $ 92 million in corporate franchise tax collections to be recorded under the corporate income tax schedule.
( 2)
The $ 92 million was transferred back from the corporate income tax schedule to the corporate franchise tax schedule. In addition, collections fell as a result of the recession.
( 3)
Legislation ratified in 2001 and clarified in a recent court case, upheld that out- of- state taxpayers who hold trademarks used in North Carolina, are doing business in the state and must pay corporate income and franchise tax. ( G. S. 105- 130.4( a)( 4)).
BASE AND RATE
{ G. S. 105- 130.3 & G. S. 105- 130.4} An income tax is levied on the net taxable income of all corporations chartered in North Carolina ( domestic) and foreign corporations doing business in the state. In computing state net income, a corporation uses the net taxable income ( as defined in the Internal Revenue Code) rate in effect for the income year for which the returns are filed. The applicable corporate income tax rate is 6.9%.
Multi- state corporations, those corporations that have taxable nexus in at least one state other than North Carolina, are required to use a specific formula to determine taxable income to North Carolina. The allocation formula used is a three- factor formula with a double weighting of the sales factor. The formula is the average of the corporation’s ratio of capital stock, payroll, and
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sales made within North Carolina to the totals of these factors, where the sales factor is double weighted.
Three Factor Formula Details
Property Factor { G. S. 105- 130.4, 17 NCAC 05C. 0800}
The property factor includes all real and tangible property, employed by the corporation during the income year and used to produce apportions able income.
Payroll Factor { G. S. 105- 130.4, 17 NCAC 05C. 0900}
The payroll factor includes the total amount of compensation paid in connection with earning apportion able income during the income year.
Sales Factor { G. S. 105- 130.4, 17 NCAC 05C. 1000}
The sales factor means all gross receipts derived from transactions and regular business activities in the course of its regular business operations.
EXEMPT CORPORATIONS
{ G. S. 105- 130.11} The following corporations are exempt from the North Carolina corporate income tax. A more thorough list can be found in the General Statutes.
1.
Fraternal beneficiary societies, operating for the exclusive benefit of the members
2.
Co- operative banks organized for mutual purposes without profits and capital stock
3.
Cemetery corporations and religious corporations
4.
Business leagues, chambers of commerce, merchants associations, and the etc.
5.
Insurance companies subject to the tax on gross premiums
6.
Telephone membership and electric membership corporations
7.
Organizations marketing the products of its members
8.
Civic leagues organized for the purpose of promoting social welfare
9.
Homeowner associations
{ G. S. 105- 131.11} The taxation of the profit from an S- corporation is not subject to the 6.9% corporate income tax rate. Rather, the pro rata share of the stockholder’s profits from an S- corporate is subject to North Carolina’s individual income tax. Part- year resident shareholders and nonresident shareholders of an S- corporation must also pay the tax. Part- year and nonresident shareholders of an S- corporation pay the tax based on ratios of attributable and non- attributable income to the state, during the tax year, and on the number of days the shareholder resides in the state or in some other state during the tax year. S- corporations may claim the credits and deductions for nonresident shareholders who elect not to file individual income tax returns in North Carolina.
CORPORATE TAX CREDITS
North Carolina provides many corporate income tax credits. To qualify for credits companies must meet various criteria. The credits often apply to a portion of expenditures, and are subject to maximum allowable amounts. Listed are some of the credits certain corporations are allowed when filing a North Carolina corporate income tax return. Please refer to the Revenue Laws of North Carolina for a more detailed list.
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{ G. S. 105- 130.22} Credit for constructing a dwelling for handicapped persons
Corporate owners of multi- family rental units are allowed a credit of $ 550.00 for each dwelling unit constructed for physically handicapped persons during the income year.
{ G. S. 105- 130.25} Credit for constructing a co- generating power plant
Any corporate entity, other than a utility that constructs a co- generating power plant, is allowed a 10% credit of the cost to purchase and install the electrical or mechanical power generating equipment.
{ G. S. 105- 130.34} Credit for donating real property for conservation purposes
Corporations that make a donation in perpetuity of interest in real property are allowed a 25% credit of the fair market value of the property.
{ G. S. 105- 130.36} Credit for conservation tillage equipment
Corporations that purchases conservation tillage equipment to be used in the farming process and in the tree cultivation process are allowed a 25% credit of the cost of the equipment.
{ G. S. 105- 130.37} Credit for gleaned crop
Corporations that grow and allow the gleaning of a crop are allowed a credit of 10% of the market price of the quantity of the crop.
{ G. S. 105- 130.39} Credit for certain telephone subscriber line charges
Corporations that provide local telephone phone services to low income residential customers at reduced rates are allowed a credit equal to the difference in the discount rate and what the customer would have paid had regular rates been charged.
{ G. S. 105- 130.41} Credit for use of North Carolina Ports
An income tax credit equal to 50% of a corporation’s income tax liability is allowed to those corporations who use the state ports to load cargo onto or unloaded cargo from an ocean going carrier.
{ G. S. 105- 130.44} Credit for poultry composting facility
Corporations that construct a poultry composting facility are allowed a credit of 25% of the cost of materials and constructing such a facility during the income year.
{ G. S. 105- 130.46} Credit for manufacturing cigarettes for export, increasing employment, and utilizing state ports
Any corporation that manufactures cigarettes for export through the state ports and meets certain employment levels is allowed a credit of 40 cents per one thousand cigarettes exported.
{ G. S. 105- 130.47} Credit for qualified expenses of a production company
Any production company that has qualified expenses of $ 250,000 or more is allowed a credit of 15% of the company’s qualified expenses for the income year.
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{ Article 3A of Chapter 105} Quality job and business expansion credits
The William S. Lee Quality Jobs and Business Expansion Act provides tax credit to corporate taxpayers for investments in manufacturing machinery and equipment, job creation, research and development, and work force training. The credits are based on a system that divides the state into five enterprise zones. Each county in a zone is given a tier rank with tier one being the most economically distressed and tier five being the least economically distressed. Taxpayers must meet certain eligibility requirements and provide defined business development and expansion in a zone to receive one of several allowed corporate income tax credits.
DISTRIBUTION
{ G. S. 115C- 546.1( b)} Revenue is deposited in the General Fund for general purposes, except for 2/ 31st of each previous quarter's collection, which is transferred to the Public School Building Capital Fund. Only General Fund revenue is shown above.
TAX CALENDAR
{ G. S. 105- 130.17} Corporations are required to file a corporate tax return on or before the fifteenth day of the third month following the close of the corporation’s income year. Some mutual associations are required to file by the fifteenth of September following the close of the calendar year and those associations that operate on a fiscal year basis file on or before the fifteenth day of the ninth month following the close of the fiscal year. Exempt organizations that are required to file a return file on their unrelated business income by the fifteenth day of May following the close of the calendar year and those operating on a fiscal year file their return on or before the fifteenth day of the fifth month following the close of the fiscal year. { G. S. 105- 131.7} S Corporations file their annual return by the due date for C Corporations.
COMPARISON WITH OTHER STATES
Forty- four states levy corporate income taxes. Most states follow the federal definition of income. Of the 44 states levying corporate income taxes, 27 states had a higher marginal rate than North Carolina, while 16 states had a lower marginal rate.
Table 6
Distribution of State Corporate Income Tax Rates
As of January 2007
HIGHEST
MARGINAL RATE
NUMBER OF STATES
Below 5.0%
8
5.0% to 5.9%
4
6.0% to 6.9%
12
7.0% to 7.9%
10
8.0% to 8.9%
8
9.0% to 9.9%
7
10.0% and above
1
Source: Federation of Tax Administrators. “ State Corporate Tax Rates”. Washington, DC. January 2007
17
ESTATE TAX
In 1999, North Carolina repealed the inheritance tax in favor of the estate tax. An estate tax is imposed on the right to transfer property at death and is not based on the relationship of the beneficiaries.
ADMINISTERED BY
Department of Revenue
Table 7
General Fund Estate Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
2000- 01
123,165,443
NA
1.0
2001- 02
104,750,885
- 15.0
1.0
2002- 03
112,504,407
7.4
1.0
2003- 04
128,479,443
14.2
1.0
2004- 05
135,211,344
5.2
1.0
2005- 06
133,379,473
- 1.4
1.0
2006- 07
161,586,810
21.2
1.0
BASE AND RATE
{ G. S. 105- 32.1} For decedents dying on or after January 1, 2005, the amount of North Carolina estate tax imposed is the amount of the state death tax credit that, as of December 31, 2001, would have been allowed under section 2011 of the Code against federal taxable income. The tax may not exceed the amount of the federal estate tax due under the Code. The federal taxable estate and the amount of the federal estate tax due are determined without taking into account the deduction for state death taxes allowed under section 2058 of the Code, and the credits allowed under sections 2011 through 2015 of the Code. { G. S. 105- 32.2}
North Carolina conforms to the federal estate tax by increasing the exemption from $ 1.5 million to $ 2.0 million effective January 1, 2006.
DISTRIBUTION
Revenue is deposited in the General Fund for general purposes.
18
TAX CALENDAR
A North Carolina estate tax return is due and payable on the date the federal estate tax return is due and payable. Interest accrues on any unpaid tax beginning nine months after the date of death.
COMPARISON WITH OTHER STATES
Over the past 20 years, most states have repealed their inheritance tax and retained the federal estate death tax credit, also referred to as the state pick- up tax. In 2001, the federal government passed the Economic Growth and Tax Relief Act which repealed the federal death tax credit over four years. However, with the passage of the Act, many states began eliminating their estate taxes completely. As of February 2004, 28 states were scheduled to repeal their estate, inheritance, or succession taxes starting in 2005. Some of the remaining states continue to retain a revenue stream from an inheritance tax or an estate tax by remaining linked to federal law as it existed prior to 2001. The states that decoupled from federal law continue to levy stand- alone inheritance or estate taxes and are unaffected by the federal legislation.
Fourteen states decoupled and continue to levy an estate tax that is very similar to the state pick- up tax. Three states replaced their pick- up tax with estate taxes; Connecticut, Kansas and Washington State. Kansas created a separate rate schedule and effective January 1, 2006 increased the exemption to $ 2 million and in 2009 the exemption increases to $ 3 million. Maine has permanently decoupled with a $ 1 million exemption.
Seven states levy an inheritance or estate tax that was never tied to the federal estate death tax credit. Maryland, Nebraska, and New Jersey levy an inheritance tax and an estate tax that is similar to the pick- up tax prior to the 2001 federal act.
Effective for tax year 2006, the portion of the federal estate tax that is exempt from taxation is $ 2 million per individual and $ 4 million per couple. In 2009, the exemption increases to $ 3.5 million per individual or $ 7 million per couple culminating in a full repeal in 2010.
As of March 2006, seventeen states and the District of Columbia have retained their estate taxes after the federal changes. Of these, thirteen states, including North Carolina, acted to decouple from the federal changes. Four states and the District of Columbia will remain decoupled unless they take legislative action.
Sources:
•
Commerce Clearing House, Inc. “ State Tax Handbook”. Chicago, Illinois, 2007.
•
Joel Michael, Legislative Analyst, “ State Response to the 2001 Federal Estate Tax Credit”. Minnesota House of Representatives, February 2004.
•
Elizabeth C. McNichol, “ State Taxes on Inherited Wealth Remain Common: 24 States Levy An Estate Or Inheritance Tax”, Center on Budget and policy Priorities, Washington DC. 2006.
19
FRANCHISE TAX
A franchise tax is levied on domestic and foreign corporations, associations, joint stock companies, trust, and any other organization which has capital stock represented by shares and enjoys corporate powers, rights, and privileges under the laws of North Carolina.
ADMINISTERED BY
Department of Revenue
Table 8
General Fund Franchise Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
409,558,340
0.6
3.4
1999- 00( 1)
306,979,197
- 25.1
2.5
2000- 01( 2)
580,431,850
89.1
4.6
2001- 02
446,270,680
- 23.1
4.0
2002- 03
429,128,005
- 4.0
4.6
2003- 04
445,294,486
3.8
3.2
2004- 05
498,681,391
12.0
3.2
2005- 06
477,055,108
- 4.3
3.0
2006- 07
531,412,140
11.4
3.0
( 1)
A change in an accounting procedure resulted in $ 92 million in corporate franchise tax collections to be recorded under the corporate income tax schedule.
( 2)
The $ 92 million was transferred back from the corporate income tax schedule to the corporate franchise tax schedule.
BASE AND RATE
{ G. S. 105- 122} The franchise tax includes taxes on persons, partnerships, and certain corporations both foreign and domestic for the privilege of doing business in the state.
The franchise tax is computed by applying the rate of $ 1.50 per $ 1,000.00 to the largest of the three bases:
•
Capital stock, surplus, and undivided profits apportioned to the state
•
The net accounting value of real and tangible property in the state
•
55% of the appraised value of property subject to the property tax
The minimum tax liability is $ 35.00, with no maximum except for qualified holding companies.
Corporations doing business in North Carolina and in other states calculate the share of capital stock tax due to North Carolina by the same method used for the corporate income tax: the
20
average of the corporation’s shares of property, payroll and sales, with the sales factor double weighted.
{ G. S. 105- 114.1} Limited Liability Companies
Limited liability companies are exempt from the franchise tax. However, if a corporation or an affiliated group of corporations owns more than 50% of the capital interest in a limited liability company, the corporation or group of corporations must include in its three tax bases ( capital stock, surplus, and undivided profits) the limited liability company’s appraised ad valorem tax value of property and the company’s actual investment in tangible property in the state.
{ G. S. 105- 116} Power and Light, Water, and Sewerage Companies
A 3.22% tax rate is applied to the total gross receipts resulting from the sale of electricity in the state, less certain allowable deductions. Water companies are taxed at 4.0% and public sewage companies are taxes at 6.0%. In addition, power and light utility services are also subject to a sales tax. ( See " Sales and Use Tax" in this section.)
{ G. S. 105- 121.1} Mutual Burial Associations
The franchise tax on mutual burial associations is based on membership and ranges from $ 15 for associations having less than 3000 members to $ 50 for associations having 30,001 or more.
{ G. S. 105- 120.2} Holding Companies
The tax rate is $ 1.50 per $ 1,000 of the value of the capital stock, surplus, and undivided profits apportioned to North Carolina. There is a maximum tax liability of $ 75,000 for corporations subject to the franchise tax, and a minimum tax of $ 35.00. If the tax liability exceeds $ 75,000 the franchise tax is calculated on the greater amount of:
1.
Fifty- five percent of the appraised value of real estate and tangible personal property in North Carolina.
- or-
2.
Net book value of real and tangible personal property in North Carolina.
DISTRIBUTION
{ G. S. 105- 116.1( a)( 2)} The state distributes to municipalities approximately 3.09% of the 3.22% gross receipts tax levied and collected on power and light companies from taxable sales within municipal districts. Distributions are made seventy five days after the end of a calendar quarter and reduced by a limited hold harmless adjustment and an amount for administering the distribution. The remaining gross receipts revenue, plus revenue from all other sources under the franchise tax schedule remain with the General Fund, and are used for general purposes.
TAX CALENDAR
{ G. S. 105- 122( a) & G. S. 105- 116( b)} Electric power companies remit the franchise tax in the same manner as the sales and use tax { G. S. 105- 164.16}. If a company’s tax liability is less that $ 100.00 monthly the franchise tax is remitted quarterly. When a company’s tax liability exceeds $ 100.00 but is less than $ 10,000 a month, the tax is remitted monthly. In the case where the tax liability exceeds $ 10,000 in a month, the company is to remit semi- monthly through electronic
21
transfer. All other utility companies with an average utility franchise tax of $ 20,000 or more per month are required to remit by electronic transfer. Mutual Burial Associations pay the tax on or before April 1 of each year. General business corporations, unless otherwise stated, file on the 15th day of the third month following the close of the income year.
COMPARISON WITH OTHER STATES
It is difficult to make a national comparison of corporate franchise taxes. The classification of a “ franchise tax” can lead to misinterpretation if one relies on name alone. Some states use corporate income as the base for the franchise tax. Other states may impose a franchise tax on some measure of capital stock. In some states, one- time or recurring registration fees are classified as a franchise tax. In the states where the franchise tax is measured on a definition of capital stock, the base almost always includes a combination of shares of outstanding stock, surplus, undivided profits, and indebtedness, for which the intent is to act as a measure of the privileges granted through the franchise tax. The apportionment practices among states vary widely in the treatment of capital stock for both domestic and foreign corporations. Generally, the tax rate many states impose ranges from $ 1 to $ 3 per $ 1,000 of capital stock. However the rate structure varies widely across states with differential rates and percentages that apply to different types of domestic and foreign corporations.
Sources:
•
Commerce Clearing House, Inc. “ State Tax Handbook”. Chicago, Illinois, 2007
•
Matthew N. Murray, Franchise/ Privilege Tax, State. University of Tennessee, 1996
22
FREIGHT CAR TAX
Companies that engage in the operation and lease of freight cars pay a gross earnings tax. This tax is in place of a property tax.
ADMINISTERED BY
Department of Revenue
Table 9
General Fund Freight Car Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
469,302
- 1.8
<. 01
1999- 00
444,094
- 5.4
<. 01
2000- 01
497,560
12.0
<. 01
2001- 02
518,887
4.3
<. 01
2002- 03
379,551
- 26.9
<. 01
2003- 04
527,447
39.0
<. 01
2004- 05
351,890
- 33.3
<. 01
2005- 06
269,932
- 23.3
<. 01
2006- 07
324,535
20.2
<. 01
BASE AND RATE
{ G. S. 105- 228.1} A levy of 3% is placed on the gross earnings of freight line companies. The gross earnings tax applies to all sources of earnings derived from operating or leasing freight cars for transporting freight over railroad lines in the state. This tax is in lieu of the property tax.
DISTRIBUTION
Revenue is deposited in the General Fund for general purposes.
TAX CALENDAR
{ G. S. 105- 228.2} Taxes are due by April 30 for gross earnings of the previous calendar year.
COMPARISON WITH OTHER STATES
Fifteen states levy specific and separate taxes on freight car lines. The levies are typically based on gross receipts that range from 1% to 6%. North Carolina's rate is 3%. However, some states levy taxes based on net earnings or on a per mile basis.
Source: Commerce Clearing House, Inc. “ State Tax Handbook”, Chicago, Illinois, 2007.
23
GIFT TAX
North Carolina levies a gift tax on the shares in property given from one person to another when the gift exceeds the annual exclusion amount. The tax is based on the relationship the recipient has to the donor.
ADMINISTERED BY
Department of Revenue
Table 10
General Fund Gift Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
19,334,909
- 6.3
0.2
1999- 00
25,085,473
29.7
0.2
2000- 01
20,254,465
- 19.3
0.2
2001- 02
13,390,362
- 33.9
0.1
2002- 03
19,304,091
44.2
0.2
2003- 04
16,630,438
- 14.0
0.1
2004- 05
18,896,837
14.0
0.1
2005- 06
16,237,070
- 14.1
0.1
2006- 07
15,641,779
- 4.0
0.1
BASE AND RATE
{ G. S. 105- 188} The gift tax is levied on the transfer of real or personal property located in the state. The tax rate is determined by the relationship between the donor and the donee and the amount of the gift. The state gift tax is levied on the amount of the gift that exceeds the annual exclusion. The annual exclusion is equal to the federal inflation- adjusted exclusion under section 2503( b) of the Internal Revenue Code. Tax rates are separated into four donee classifications and only the amount of the gift that exceeds the exclusion is subject to tax. The tax on gifts made to nonresidents applies only if the property is within the jurisdiction of the state.
Donee classifications for gift tax purposes:
•
Spouse
•
Class A, which includes lineal issues or ancestors, stepchildren, or adopted children.
•
Class B, which includes brothers, sisters, issues of either, or blood aunts, or uncles.
•
Class C, which includes other relatives or unrelated persons.
The annual exclusion amount is $ 12,000 for gifts made on or after January 1, 2006. A donor with permission of the other spouse may use some or all of the spouse's $ 12,000 annual exclusion. In addition to the annual exclusion, there is a $ 100,000 per donor lifetime exemption to be deducted from gifts made to a Class A donee. Gifts to state or political subdivisions or nonprofit charitable, religious, or educational corporations within the state are exempt.
24
Table 11
Gift Tax Rate and Bracket Schedule
Rate for
% Rate for
Rate for
Tax Brackets
Class A Donee
Class B Donee
Class C Donee
$ 0 - 5,000
- NA-
4
- NA-
5,001 - 10,000
1
5
8
10,001 - 25,000
2
6
9
25,001 - 50,000
3
7
10
50,001 - 100,000
4
8
11
100,001 - 200,000
5
10
12
200,001 - 250,000
6
10
12
250,001 - 500,000
6
11
13
500,001 - 1,000,000
7
12
14
1,000,001 - 1,500,000
8
13
15
1,500,001 - 2,000,000
9
14
16
2,000,001 - 2,500,000
10
15
16
2,500,001 - 3,000,000
11
15
17
Above 3,000,000
12
16
17
DISTRIBUTION
Revenue is deposited in the General Fund for general purposes.
TAX CALENDAR
{ G. S. 105- 197} Taxes are due by April 15 of the calendar year on the amount of a gift that exceeds the annual exclusion.
COMPARISON WITH OTHER STATES
Four states including North Carolina levy a gift tax. The additional three are Connecticut, Louisiana, and Tennessee. Each state’s tax is based on graduated schedules that vary widely in terms of exemptions, rates, and recipient categories.
Source: Commerce Clearing House, Inc. “ State Tax Handbook”. Chicago, Illinois, 2007.
25
INDIVIDUAL INCOME TAX
The individual income tax is imposed on the taxable income of residents, part- year residents and nonresidents, and children and dependents who receive income from a North Carolina source during the tax year.
ADMINISTERED BY
Department of Revenue
Table 12
General Fund Individual Income Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
6,606,500,278
9.6
55.2
1999- 00
7,080,106,177
7.2
57.1
2000- 01
7,391,342,524
4.4
58.8
2001- 02
7,134,629,832
- 3.5
57.0
2002- 03
7,088,526,873
- 0.7
58.8
2003- 04
7,509,898,086
6.0
54.3
2004- 05
8,409,288,618
12.0
54.3
2005- 06
9,400,167,970
12.0
55.2
2006- 07
10,507,966,531
12.0
56.0
BASE AND RATE
{ G. S. 105- 134.2} Every individual resident, including part- year residents and nonresidents, and S- corporations and partnerships that receive income for the tax year from a North Carolina source, is required to file an individual income tax return.
Resident
Residents of North Carolina are required to file an individual income tax return if their federal gross income equals or exceeds the listed federal adjusted gross income by filing status in Table 13.
Part- year Resident and Nonresident
A part- year resident who received income while a nonresident of North Carolina and whose gross income equals or exceeds the listed federal adjusted gross income ( Table 13) is require to file a return, if income was derived from any of the following activities:
•
The ownership of any interest in real or tangible personal property in the state.
•
From a business, trade, profession or occupation carried on in the state.
•
Gambling activities.
26
Table 13
North Carolina Filing Status
Based on Federal Adjusted Gross Income
Federal
Filing Status
Adjusted Gross Income
Single
$ 5,500
Single age 65 >
$ 6,200
Married, filing jointly
$ 11,000
Married, filing jointly one age 65 >
$ 11,600
Married, filing jointly both age 65 >
$ 12,200
Married filing separate returns
$ 2,500
Head of Household
$ 6,900
Head of Household age 65 >
$ 7,650
Widow( er) w/ dependent
$ 8,500
Widow( er) age 65 >
$ 9,100
Children and other Dependents
There is a separate filing status for single and married dependents either age 65 or older or blind. These individuals are subject to the individual income tax if the amount of earned, unearned, and/ or gross income exceeds specific minimum amounts. In addition, these taxpayers must follow specific instruction when making adjustments to federal taxable income in order to determine state taxable income. For additional information on the tax treatment of this class of taxpayer, please see the Department of Revenue’s Instructions for Filing Form D- 400. ( http:// www. dor. state. nc. us/ downloads/ D401. pdf)
{ G. S. 105- 134.6} In calculating state taxable income, certain adjustments must be made to the federal taxable income in order to derive state taxable income.
Each personal exemption for married filing jointly ( two exemptions), head of household, single, and married filing separately taxpayers is $ 2,500 for a taxpayer( s) whose federal adjusted gross income ( AGI) is less than the amounts shown below, and $ 2,000 if more than these amounts.
Federal
Filing Status
Adjusted Gross Income
Married, filing jointly
$ 100,000
Head of Household
80,000
Single
60,000
Married, filing separately
50,000
Effective for taxable years beginning on or after January 1, 2004, the filing status and standard deduction are as follows:
27
Filing Status
Standard Deduction
Married, filing jointly
$ 6,000
Head of Household
$ 4,400
Single
$ 3,000
Married, filing separately
$ 3,000
Table 14
Rate and Tax Bracket Structure
{ G. S. 105- 134.2}
Married
Married
Head of
Rate
Filing Joint
Filing Separate
Household
Single
6.0%
$ 0 - 21,250
$ 0 - 10,625
$ 0 - 17,000
$ 0 - 12,750
7.0%
21,251 - 100,000
10,626 - 50,000
17,001 - 80,000
12,751 - 60,000
7.75%
100,001 - 200,000
50,001 - 100,000
80,001 - 160,000
60,001 - 120,000
8.00%( 1)
200,001 and above
100,001 and above
160,001 and above
120,001 and above
( 1)
By actions of the 2005 North Carolina General Assembly, the 8.00% rate is maintained through the 2007 tax year and is reduced to 7.75% for the 2008 tax year.
DISTRIBUTION
Revenue is deposited in the General Fund for general purposes, except for $ 95,331,927 that is dedicated to local governments as a reimbursement for the repeal of the intangible personal property tax.
TAX CALENDAR
Returns and tax payments are due by April 15 for income earned during the previous calendar year.
{ G. S. 105- 163.2 & G. S. 105- 163.6} Employers who withhold an average of less than $ 250 per month are required to file and remit tax payments quarterly. Payments are due on the last day of the first month following the end of the calendar quarter for withholdings of the previous quarter. Every employer required to deduct and withhold an average of between $ 250 and $ 2,000 in income taxes per month, and all employers engaged in any business which is seasonal or temporary in nature, shall make returns and payments of such withholdings by the fifteenth day of the month following the month in which such amounts were withheld. Amounts withheld in December of the tax year are due on January 31. Employers who withhold an average of at least $ 2,000 per month are required to remit payments ( semiweekly) in accordance with the federal withholding payment schedule.
{ G. S. 105- 163.15( f)} Estimated income tax payments are required, if the taxpayer expects the net estimated tax less allowable credits to be more than $ 1,000. Payments are due in four installments for the estimated current year's income by April 15, June 15, September 15, and January 15 ( for the last quarter of the preceding year).
28
COMPARISON WITH OTHER STATES
As of January 1, 2007, forty states levy individual income taxes, with two taxing only dividend and interest income, and one whose state individual income tax rate is 25% of the federal tax liability. Most states follow the Federal definition of gross or taxable income. However, tax rates, deductions, and exemptions varying widely by state.
North Carolina relies more heavily on the individual income tax than most other states, obtaining 30% of its state and local taxes from the individual income tax in tax year 2004 as compared to 21% for the nation, 25% for the six southeastern states ( 1), and 21% for the eleven most populated states ( 2). In terms of reliance on the individual income tax, North Carolina ranked seventh in the nation, second place in the Southeast, and third among the eleven most populous states.
At 8.00%, North Carolina has the ninth highest marginal tax rate in the nation. North Carolina has the highest marginal tax rate among the six southeastern states, and the third highest among the eleven most populous states. The current 8.00% rate is scheduled to expire on January 1, 2008, when the highest tax bracket will revert to 7.75%. Based on current rates this would be the twelfth highest marginal tax rate.
On a national basis, 2.24% of state personal income was devoted to state individual income tax payments, while North Carolina citizens allocated 3.02% of their income to individual income tax payments. North Carolina ranked eighth in the nation, second among the southeastern states, and third among the ten most populated states.
In terms of per capita income, the average taxpayer in the nation paid $ 733.00 in individual income tax payments, while North Carolina taxpayers paid $ 880.00. North Carolina ranked fourteenth in the nation, second in the Southeast, and fourth among the eleven largest states.
( 1)
Georgia, Kentucky, North Carolina, South Carolina, Tennessee, Virginia.
( 2)
California, Florida, Georgia, Illinois, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas.
Source: Federation of Tax Administrators. “ State Corporate Tax Rates”. Washington, DC. January 2007
29
INSURANCE TAX
The gross premiums from all insurance contracts covering persons, property and risk are subject to the insurance tax. Insurance companies that pay a gross premiums tax are not taxed under the franchise tax or the corporate income tax.
ADMINISTERED BY
Department of Revenue and Department of Insurance
Table 15
General Fund Gross Receipts on Insurance Companies
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
291,230,879
2.6
2.4
1999- 00
273,367,118
- 6.1
2.2
2000- 01
305,791,331
11.9
2.4
2001- 02
340,785,358
11.4
2.7
2002- 03
408,873,355
20.0
2.4
2003- 04
423,405,050
3.6
3.1
2004- 05
431,664,202
2.0
3.0
2005- 06
431,729,295
.02
3.0
2006- 07
475,545,413
10.0
3.0
BASE AND RATE
{ G. S. 105- 228.5} The insurance tax is measured on the gross premiums from business done during the previous year on contracts covering persons, property, and risk resident located in the state. There are two base gross premium tax rates that are applied to insurance companies:
•
2.5% tax on the gross premiums of worker's compensation policies
•
1.9% tax on the gross premiums of all other insurance policies including health maintenance corporations, hospitals, medical and dental service corporations
Note: The 1.0% gross premiums tax on HMO’s is repealed effective January 1, 2007.
ADDITIONAL TAXES
{ G. S. 105- 228.5} In addition to the 2.5% rate, fire and lightning contracts are taxed an additional 1.33% on the gross premiums. Fire and lightning contracts, for coverage within fire districts, are taxed an additional .05%. A portion of the proceeds from each of these taxes goes to help fund fire safety organizations.
{ G. S. 58- 6- 25} Insurance Regulatory Charge
The General Assembly sets the insurance regulatory charge every year. For the 2007 calendar year, the rate is 5.5% of an insurance company’s premium tax liability for the tax year. When
30
computing this charge, an insurance company does not include any of the additional taxes levied under G. S. 105- 228.
{ G. S. 105- 228.5A} Insurance Guaranty Association
The North Carolina Guaranty Association covers life insurance and casualty insurance companies. Assessments are levied to cover the cost of insolvency and liquidations. A tax credit against premium tax payments equal to the amount of the assessment is allowed.
An insurer who pays the gross premiums tax is allowed a credit against the tax equal to 20% of the amount of the assessment in each of the five taxable years following the year in which the assessment was made.
DISTRIBUTION
{ G. S. 105- 228.5( d), G. S. 58- 87- 5, and G. S. 58- 6- 25} The proceeds from the insurance regulatory charge are credited to the Insurance Regulatory Fund. Moneys from the Fund are used to defray the expenses associated with the operations of the Department of Insurance.
Twenty five percent of the 1.33% gross premiums on fire and lightening contracts are deposited with the Volunteer Fire Department Fund. These funds are used to make grants to purchase equipment and for capital improvements by volunteer fire departments. Three percent of the tax proceeds from the .05% gross premiums tax on fire and lightning contracts are credited to the State Fireman’s Association for general purposes. The remainder of the tax proceeds is deposited in the General Fund. Only General Fund revenue is shown above.
TAX CALENDAR
{ G. S. 105- 228.5 ( e) & ( f)} Gross premium taxes are due by March 15 for the previous calendar year's activities. Insurance companies with a premium tax liability of $ 10,000 or more are allowed to remit the tax in three equal installments. The installment payments must equal at least 33 1/ 3% of the premium tax liability for the previous year. Payment is due on or before the fifteenth of April, June, and October. Regulatory fees are due at the time the gross premium tax is due.
Effective for the tax year 2007, health maintenance organizations are to remit two estimated tax payments with each payment being equal to 50% of their estimated premium tax liability for the 2007 tax year. The estimated payments are due by April 15 and June 15, 2007.
COMPARISON WITH OTHER STATES
Every state levies an insurance premium tax, which is paid in lieu of other taxes. The most typical premium tax rate is approximately 2%. It is difficult to compare rates between states because premium taxes vary depending on the type of policy and other special provisions apply. However, it appears that North Carolina's premium taxes are typical in comparison to other states.
Source: Commerce Clearing House, Inc. “ State Tax Handbook”. Chicago, Illinois, 2007.
31
MANUFACTURING TAX
There is a special type of privilege tax classification applied to certain machinery and equipment used in manufacturing and recycling. The special classification also applies to replacement parts and accessories.
ADMINISTERED BY
Department of Revenue
Table 19
General Fund Manufacturing Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
2005- 06
11,951,991
N/ A
.07
2006- 07
36,558,7801
206
.20
Note: FY 2005- 06 is a partial year collection.
HISTORIC NOTE
In the past, North Carolina levied a 1% sales and use tax with an $ 80.00 cap that was applied to certain manufacturing and agriculture equipment. The tax was known as the mill machinery tax. Prior to Fiscal Year 2005- 06 the tax collections from the 1% manufacturing class of property were included under the sales and use tax. Due to the Streamline Tax Agreement, in which North Carolina participated, a 1% preferential sales tax rate was not allowed to be considered in the sales and use tax classification. In 2005, the General Assembly classified manufacturing equipment subject to a manufacturing privilege tax.
BASE AND RATE
{ G. S. 105- 187.51} Certain equipment and machinery, including parts and accessories used in the production process, are taxed at 1% with an $ 80.00 cap. The 1% classification also applies to equipment purchased and used by recycling and research and development companies. Fuel used in the production process is taxed at 1% without a cap.
DISTRIBUTION
The net proceeds from this tax are deposited in the General Fund for general purposes.
TAX CALENDAR
{ G. S. 105- 164.16} The manufacturing tax is collected and remitted in the same manner as the sales and use tax.
COMPARISON WITH OTHER STATES
A comparison with other state has not been prepared.
32
PIPED NATURAL GAS TAX
Piped natural gas received for consumption within the state is subject to an excise tax. Natural gas sales subject to the excise tax are not subject to the sales and use tax or the gross receipts tax.
ADMINISTERED BY
Department of Revenue
Table 16
General Fund Tax Collections on Piped Natural Gas
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00( 1)
27,715,136
0.02
2000- 01
37,212,997
34.3
0.03
2001- 02
40,949,924
10.0
.33
2002- 03
36,853,402
- 10.0
.30
2003- 04
38,994,881
6.0
.30
2004- 05
35,081,603
- 10.0
.23
2005- 06
33,654,268
- 4.1
.20
2006- 07
36,057,204
7.1
.20
( 1)
The excise tax became effective July 1, 1999, and collections do not reflect a full fiscal year.
BASE AND RATE
{ G. S. 105- 187.41} Prior to 1999, piped natural gas sales were subject to a 3% sales and use tax and a 3.22% gross receipts tax. In 1999, the sales and gross receipts taxes were repealed in favor of an excise tax. The tax is based on the monthly volume of natural gas received by the final user.
A local distribution company making deliveries to a sales or transportation customer is considered the final user for tax purposes and is responsible for paying the tax. If the piped natural gas is received by direct access from an interstate gas pipeline, the person, firm, or corporation receiving the gas is responsible for paying the tax.
Therms
Rate
First 200
$ 0.05
201 to 15,000
0.035
15,001 to 60,000
0.024
60,001 to 500,000
0.015
Over 500,000
0.003
33
DISTRIBUTION
{ G. S. 105- 187.44} Taxpayers are required to file quarterly returns with the Department of Revenue. The quarterly returns report the amount of piped natural gas delivered to sales and transportation customers in each city of the state. Within 75 days of the end of each quarter, the Department of Revenue distributes to municipalities one- half of the amount of tax attributable to the activity within their jurisdiction. The remaining revenue is deposited in the General Fund for general purposes.
TAX CALENDAR
{ G. S. 105- 187.43} Payments are due semimonthly in accordance with the schedule set out in G. S. 105- 164.16 for semimonthly payments of sales and use taxes. .
TAX COMPARISON
A tax comparison was not undertaken.
34
PRIVILEGE LICENSE TAX
A license tax is imposed on certain business for the privilege of engaging in a specific business activity during the fiscal year.
ADMINISTERED BY
Department of Revenue
Table 17
General Fund Privilege License Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99
27,588,260
- 24.7
0.2
1999- 00
43,828,822
58.9
0.4
2000- 01( 1)
2,953,653
- 93.3
.02
2001- 02
26,579,102
- 41.0
.02
2002- 03
44,721,244
68.3
.04
2003- 04
41,615,694
- 7.0
.30
2004- 05
44,992,019
8.1
.29
2005- 06
45,569,504
1.3
.27
2006- 07
46,277,585
1.6
.30
( 1) A Court settlement resulted in large refunds to two large corporations.
BASE AND RATE
{ G. S. 105- 33} Various business license taxes are levied on persons, firms, or corporations engaging in certain businesses or professions. The tax is paid annually on or before the first of July.
{ G. S. 105- 37.1} Dances, Athletic Events, Shows, Exhibitions and Other Entertainment
A 3% gross receipts tax is levied on the receipts of certain athletic, entertainment, and exhibition events where the admission fee exceeds 50 cents. Counties and Cities are allowed to levy a privilege license tax on some business activities but the tax cannot exceed $ 25.00.
{ G. S. 105- 38.1} Motion Picture Shows
A 1% gross receipts tax is levied on the operation of motion picture shows. If a person engages in motion picture entertainment and a business under G. S. 105- 37.1, the privilege license tax under G. S. 105- 37.1 applies to the entire gross receipts from both activities.
{ G. S. 105- 41} Attorneys and Other Professionals
Individuals engaged in various professions including physicians, attorneys, engineers, public accountants, and so forth pay a $ 50 annual license fee. Accounting firms pay an additional privilege tax of $ 12.50 for each employee engaged in accounting practices. If an individual
35
engages in more than one business activity under this section, the individual must secure a privilege license for each activity. Counties and cities are not authorized to levy a tax under this section.
{ G. S. 105- 83} Installment Paper Dealers
Privilege license taxes are also levied on installment paper dealers at a rate of .227% of the face value of all installment paper, notes, bonds, contracts or evidence of debt for which a lien against personal property, located in the state, is made to secure payment.
{ G. S. 105- 88} Loan Agencies
Any business, firm, or organization engaged in the business of making loans and lending money, check cashing, and in the pawnbroker business must pay a privilege license tax of $ 250.00 for each location. This section does not include banks, industrial banks, trust companies, savings and loan associations, cooperative credit unions, and real estate companies.
{ G. S. 105- 102.3} Banks
Every bank or banking association, including national banking associations that operate in the state, must pay a privilege license tax equal to $ 30.00 per $ 1,000,000 in total assets.
{ G. S. 105- 102.6} Publishers of Newsprint Publications
The privilege license tax for newspaper publishers is based on a minimum recycled content. The tax is levied on each publisher whose recycled content is less that 40%. The rate is $ 15.00 for each ton by which a publisher falls short of the minimum.
DISTRIBUTION
Net Proceeds of the privilege license tax are deposited in the General Fund for general purposes.
TAX CALENDAR
Taxes for annual licenses are due annually by July 1 for the upcoming fiscal year. Gross receipts taxes on entertainment and motion pictures are due by the 10th day after the end of each month.
COMPARISON WITH OTHER STATES
All states have occupation or business license taxes or fees. The occupations and privilege license tax rates vary significantly within and between states.
Source: Commerce Clearing House, Inc. “ State Tax Handbook”. Chicago, Illinois, 2007.
36
SALES AND USE TAX
The sales and use tax is levied on the gross receipt of taxable transactions such as retail sales, the lease or rental of tangible personal property and some services. The sales and use tax rate is a combined rate made up of the state rate and the sum of the local option sales and use tax rates.
ADMINISTERED BY
Department of Revenue
Table 18
General Fund Sales and Use Tax Collections
Annual
Percent of
General Fund
Percent
General Fund Tax
Fiscal Year
Collections
Change
Collections
1998- 99( 1)
3,376,206,664
3.7
28.2
1999- 00( 2)
3,354,897,708
- 0.7
27.1
2000- 01
3,435,558,577
2.4
27.3
2001- 02
3,705,769,832
8.0
30.0
2002- 03
3,922,821,877
6.0
27.3
2003- 04
4,222,201,842
7.6
30.5
2004- 05
4,477,159,178
6.0
29.0
2005- 06
4,893,911,220
9.3
29.0
2006- 07
4,995,570,841
2.1
27.0
( 1)
The state sales tax on food consumed at home was reduced from 3% to 2%. The local tax rate remains.
( 2)
The state sales tax on food consumed at home was eliminated. The local tax rate remains.
BASE AND RATE
{ G. S. 105- 164.4} The general state sales tax is imposed on the retail sale, lease, or rental of tangible personal property not specifically exempt or subject to taxation at a reduced rate. Until October 1, 2008, all items that are subject to the state sales tax rate of 4.25% are also subject to the 2.5% Local Government Sales and Use Tax. After October 1st, the state rate will increase to 4.5% and the local rate will be reduced to 2.25%. Effective October 1, 2009, the state and local rates will change again by one- quarter of a percent. At that time the state rate will be 4.75% and the local rate will be 2%. The “ combined rate” remains at 6.75%. This rate swap is due to actions by the 2007 session of the General Assembly authorizing the state to take over the local government portion of Medicaid expenses. Local governments are allowed one of two additional taxing options to make- up the revenue loss. Note: Only the state rate is recorded in this section.
The Local Government Sales and Use Tax is made up of three separate rates defined in Article 39, Article 40, Article 42, and Article 44 of Chapter 105 of the North Carolina General Statutes. Mecklenburg County collects an additional .5 cent on the local option sales and use tax. ( Article
37
43 of Chapter 105) The revenue from this tax is used for public transportation. For additional information, see the Local Government section of this publication.
The gross receipts from the lease or rental of tangible personal property, services such as the rental of certain lodging accommodations, cleaning services provided by dry cleaners and similar types of businesses are subject to the state rate.
REDUCED BASES AND RATES
{ G. S. 105- 187.5( b) & G. S. 105- 187.9( a)} The gross receipts from the long- term rental or leases of motor vehicles are subject to the 3% highway use tax, and collections are credited to the Highway Trust Fund. Short- term leases of motor vehicles ( less than 365 continuous days) are subject to the 8% rate and credited to the General Fund. For additional information on the Highway Use Tax, see the Highway Trust Fund section of this publication.
{ G. S. 105- 164.4( a)( 1a)} Manufactured housing sold at retail is taxed at a 2% state rate with a maximum tax or cap of $ 300.00.
{ G. S. 105- 164.4( 8)} The tax rate on modular homes is 2.5% of the retail price.
{ G. S. 105- 164.4( a)( 1b)} A 3% rate of the state sales tax is levied on the retail price of new and used aircraft, and boats, with a maximum levy of $ 1,500.
{ G. S. 105- 164.4( a)( 1f)} The sale of electricity to commercial laundries is taxed at 2.83%.
{ G. S. 105- 164.4( a)( 1i)} Electricity sold to manufacturing industries and manufacturing plants for use in connection with the operations of the industry or plant is taxed at 2.6%.
{ G. S. 105- 164.4( a)( 1j)} Electricity sold to manufacturing industries and manufacturing plants for use in connection with the operations of the industry or plant is taxed at 1.8%. The rate is reduced to 1.4% effective July 1, 2008. The tax rate on this class of taxpayer is further reduced to .8% effective July 1, 2009 and repealed effective July 1, 2010.
{ G. S. 105- 164.4C} Telecommunication services, cable services, and satellite services ( including satellite radio services and voice mail) are subject to the general state rate.
{ G. S. 105- 164.4( a)( 4c)} The combined general sales and use tax rate applies to the gross receipts from telecommunication services.
{ G. S. 105- 164.44F ( a)} Municipalities receive 19.42% of the gross receipts from telecommunication service provided within municipal jurisdictions. Counties and cities share in an additional 8% of the gross receipts from telecommunication services provided statewide.
{ G. S. 105- 164.4( a)( 6)} Cable service providers, direct- to- home satellite providers, and any other person or business providing video programming is considered a retailer, and the gross receipt from the sale of such services is subject to the general sales and use tax rate. Cities and counties
38
share in 25% of the net proceeds from video programming services and 37.5% of the net proceeds from direct- to- home satellite services { G. S. 105- 164.44I}.
{ G. S. 105- 164.4 ( 4a)} Gross receipts derived by a utility from the sale of electricity are subject to the state sales tax of 3%, in addition to the 3.22% rate { G. S. 105- 116} of tax imposed under the franchise tax schedule { G. S. 105- 116.1}. Municipalities receive 3.09% of the franchise tax from the sale of electricity within the municipal boundary.
{ G. S. 105- 164.13B} Food Exempt from Sale Tax
Food is exempt from the sales tax unless it is sold through a vending machine. Prepared food, soft drinks, candy, and dietary supplements are subject to the sales tax. These items are still subject to the local government sales tax.
{ G. S. 105- 164.13C} Sales and Use Tax Holiday
Enacted in 2002, the sales tax holiday extends for three days beginning on the first Friday in August and extending through Sunday. The exemption is extended to clothing, school supplies, sport and recreational equipment, computers, and educational software. There is a $ 100 cap per item of clothing and school supplies, a $ 50 cap per item of sport or recreational equipment, and a $ 3,500 cap per computer. Computer supplies with a sales price of $ 250.00 or less are exempt, beginning with the 2006 holiday.
{ G. S. 105- 164.13} Sales and Use Tax Exemptions and Exclusions
The federal government and the North Carolina Department of Transportation are exempt from state and local sales and use taxes. Many items, such as prescription medicine and certain medical devices, are exempt from the tax. Due to actions of the North Carolina General Assembly during the 2005 Legislative Session, many of the items taxed at 1% with an $ 80.00 cap are now exempt from the State Sales and Use Tax.
{ G. S. 105- 164.14} Certain Refunds Authorized
Currently, state government agencies receive a refund of local sales and use taxes paid on their direct purchases for use. Effective July 1, 2004, sales to state agencies will be exempt from sales or use tax if the state agency making the purchase furnishes a tax exemption number to the seller. Certain governmental entities, as defined by statute, may obtain refunds, as well as hospitals, educational institutions, churches, orphanages, and charitable and religious institutions not operating for a profit, and certain homes for the aged, sick, or infirm.
DISTRIBUTION
Revenue is deposited in the General Fund for general purposes, except for a small amount dedicated to the Wildlife Resource Fund. Sixty percent of the state sales tax on dry cleaning and laundry services is dedicated to the Dry Cleaning Solvent Cleanup Fund. The sales and use tax, collected from taxable food items, is distributed to local governments. For additional information, see the Local Government section of this publication.
TAX CALENDAR
{ G. S. 105- 164.16} For merchants with a monthly sales and use tax liability of at least $ 100, but less than $ 10,000, taxes are due monthly by the fifteenth of each month on sales that took place
39
the previous month. Businesses with monthly sales and use tax liabilities of $ 10,000 or more are required to remit twice a month. One semimonthly payment covers the period of the month from the first through the fifteenth. The second payment covers the period of the month from the sixteenth through the end of the month. Persons who consistently owe sales or use taxes of less than $ 100 per month may file reports quarterly by the last day of the month following the end of the quarter.
COMPARISON WITH OTHER STATES
Forty- five states levy sales and use taxes. As of January 2007, state sales tax rates ranged from 2.9% to 7.25%, with a median rate of 5.3%. The base state sale tax rate for North Carolina is 4.25% until October 2008. There are thirty four states with a higher state sales tax rate and ten states with a lower rate than North Carolina.
Additional local sales and use taxes are levied in 35 states including North Carolina. The maximum local tax rates ranged from 0.25% to 7%, with a median rate of 3.0%. North Carolina has a 2.5% local sales tax except for Mecklenburg County that has an additional .5% rate. The 4.5% rate ranks North Carolina fifth among the southeastern states ( 1) and eighth among the eleven most populated states ( 2). The combined state and maximum local sales and use taxes ranged from 4.0% to 11%, with a median rate of 7.0%. North Carolina has a 7.5% combined rate. Nineteen states have a higher combined state and local rate than North Carolina. Among the southeastern states North Carolina ranked second, and seventh among the eleven most populated.
Thirty states that levy a sales and use tax exempt food. Prescription medicine is exempt in all states except Illinois which levies a 1% tax. Certain nonprescription drugs are exempt in eleven states, while Illinois levies a 1% tax. Nonprescription drugs are subject to the state and local sales tax in North Carolina.
( 1) Georgia, Kentucky, North Carolina, South Carolina, Tennessee, Virginia
( 2) California, Florida, Georgia, Illinois, Michigan, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Texas
Source: Federation of Tax Administrators. “ Comparison of State and Local Retail Sales Taxes”, Washington, DC, January 2007
40
PART III
HIGHWAY FUND TAXES
41
HIGHWAY FUND
Highway Fund revenue is primarily used to maintain the state’s 78,615 miles of public roads, and to fund the administrative operations of the Department of Transportation and its many Divisions, including the Division of Motor Vehicles. In addition, the Fund supports the Department’s commitment to a multi- modal transportation network encompassing public transportation, aviation, rail, ferries, and bicycle and pedestrian programs. Highway Fund revenue is also used to provide supplemental funding for secondary road construction and provide aid to municipalities for Powell Bill road maintenance.
The Highway Fund receives support from three primary revenue sources. The first is the excise tax on motor fuels, of which the Highway Fund receives 75%. The second source of revenue is licenses and fees collected by the Division of Motor Vehicles, and the third source is from interest earned on cash balances held by the state treasurer.
Each summary outlines the subject being taxed, the tax rate or rates, total collections, any distributions made from the collections, and any exemptions. A comparison with similar taxes from other states is made for most schedules and is updated as often as national data is available.
42
Truck Plates8% Staggered Registration11% Driver License7% IRP4% Other 5% Motor Fuels66% CHART 4NORTH CAROLINA HIGHWAY FUND TAX COLLECTIONS( 2006- 07) Motor Fuels $ 1,186,563,036Truck Plate 137,651,224Staggered Registration 199,209,664Driver License 125,922,739International Registration Plan ( IRP) 68,385,177Other Licenses and Fees 82,396,245 ---------------------- Total $ 1,800,128,085
43
DEALER AND MANUFACTURER LICENSE FEES
Individuals, firms, and corporations that engage in the sale of new, used, and newly manufactured vehicles must obtain a license from the Division of Motor Vehicles.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 20
Highway Fund Dealer and Manufacturer License Fee Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
1,448,912
20.3
0.1
2000- 01
1,145,552
- 20.9
0.1
2001- 02
1,078,075
- 5.9
.01
2002- 03
1,104,651
2.5
.01
2003- 04
1,071,555
- 3.0
.01
2004- 05
1,051,171
- 2.0
.01
2005- 06
1,272,243
21.0
0.1
2006- 07
760,763
- 40.0
.004
BASE AND RATE
{ G. S. 20- 289} Annual license fees are levied on motor vehicle manufacturers, dealers, distributors, distributor branches, wholesalers, and salesmen at the following rates:
1.
Motor vehicle dealers, distributors, distributor branches, and wholesalers, $ 70.00 for each principal place of business
2.
Manufacturers, $ 150.00, and for each factory branch, $ 100.00
3.
Motor vehicle sales representatives, $ 15.00
4.
Factory and distributor representatives, $ 15.00
{ G. S. 20- 291} If a representative changes employers, the fee for the issuance of a license stating the name of a new employer is $ 10.00.
{ G. S. 20- 287} A manufacturer, factory branch, distributor, and distributor branch may operate without obtaining a motor vehicle dealer’s license.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
44
TAX CALENDAR
{ G. S 20- 288} All licenses are granted for a period of one year unless suspended or revoked.
COMPARISON WITH OTHER STATES
A comparison with other states was not taken. 45
DRIVER’S LICENSE FEES
In order to operate a motor vehicle on public roads, a person must be at least 16 years of age and be licensed by the Division of Motor Vehicle. Persons under the age of 16 can operate a motor vehicle on public roads under limited circumstances.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 21
Highway Fund Driver’s License Fee Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund
Fiscal Year
Collections
Change
Tax Collections
1999- 00
58,944,575
- 5.4
5.1
2000- 01
66,172,057
12.3
5.3
2001- 02
68,941,464
4.2
5.4
2002- 03
70,463,916
2.2
5.7
2003- 04
74,839,528
6.2
5.5
2004- 05
79,370,033
6.1
5.7
2005- 06
110,492,674
39.2
6.6
2006- 07
125,922,739
14.0
7.0
Note: Increase in fees effective October 2005 partial year collections FY 2005/ 06
BASE AND RATES
{ G. S. 20- 11} Limited Learners Permit and Provisional Licenses
Individuals less than the age of 18 are required to have both instruction and experience before receiving a basic operator’s license. In addition to successfully completing a prescribed driver training course under G. S. 20- 88.1, a driver is allowed limited driving privileges. Note: Only the highlights are listed below. For additional driving limitations by level please see G. S. 20- 11.
Level I – Limited Learner’s Permit
The individual must be 15 years old and is restricted to driving under supervision. For the first six months, level I drivers can only drive between the hours of 5: 00 a. m. and 9: 00 p. m.
Level II – Limited Provisional License
The individual must have held a limited learners permit for 12 months and be 16 years old. The driver may drive without supervision under certain limitations regarding time of day and the number of occupants in the vehicle.
Level III – Full Provisional License ( Class C)
The individual must be 16 years old and have held a limited provisional license for at least six months, have a driving eligibility certificate or a high school diploma, and have never been convicted of a motor vehicle moving violation.
46
Minimum Age Requirements for Licensure:
1.
{ G. S. 20- 9} Classes of regular licenses, Class A- 18, Class B- 18, Class C - 16.
2.
{ G. S. 20- 10} Public passenger carrying vehicles, same as classes A & B.
3.
{ G. S. 20- 11} Issuance of limited learners permit is 15 years of age.
4.
{ G. S. 20- 37.13} Commercial drivers must be 21 years old and a resident of the state.
{ G. S. 20- 7( i) & G. S. 20- 37.16 ( d)} Classes of Driver’s Licenses A, B, & C
1.
Learners permit; issued for 18 months is $ 15.00
2.
The basic operator’s license; class C is issued for a fee of $ 4.00 per year
3.
Chauffeurs licenses; classes A and B are issued for a fee of $ 4.00 per year
4.
Commercial licenses; classes A, B, and C are issued for a fee of $ 15.00 per year
License Renewal Periods
Under the age of 18 – A license expires on the 21st birthday.
Between the ages of 18 and 53 – A license expires eight years after the date of issuance.
At least 54 years old – A license expires five years after the date of issuance.
In order to operate a motorcycle on the roadways of the state, an operator must have a Class C driver’s license and a motorcycle endorsement. The fee for a motorcycle endorsement is $ 1.75 cents per year.
Commercial Driver Licenses ( CDL)
{ G. S. 20- 37.13} The fee for a commercial drivers license permit is $ 15.00 per year.
{ G. S. 20- 37.15( a1)} Application fee for a commercial driver’s license is $ 30.00 per year.
{ G. S. 20- 37.16( d)} Commercial driver’s license is $ 15.00 per year.
{ G. S. 20- 37.16( d)} The commercial endorsement fee is $ 3.00 per year.
In addition, the following fees apply:
1.
{ G. S. 20- 14} Duplicate license is $ 15.00 per year.
2.
{ G. S. 20- 26( e)} Limited and complete, exact copy( s) of license is $ 8.00 per year.
3.
{ G. S. 20- 26( e)} Certified true copy of complete license record is $ 11.00 per year.
4.
{ G. S. 20- 37.7( d)} Special ID cards for non- drivers aged 16 and over are $ 15.00 per year.
5.
{ G. S. 20- 7( i1)} Restoration fee to restore a license after revocation is $ 50 and $ 75 if revoked for driving under the influence. A charge of $ 50 applies for failure to surrender a revoked driver's license.
6.
{ G. S. 20- 16( e)} Driver improvement clinic is $ 50.
DISTRIBUTION
All revenue collected from licenses and fees is deposited in the Highway Fund for highway purposes, except $ 25 of the $ 75 license restoration fee. Revenue collected for the restoration of a license revoked for driving under the influence is split between the Highway Fund and the General Fund. The $ 50 license restoration fee and $ 50 of the $ 75 restoration fee for driving while impaired, are deposited in the Highway Fund. Twenty five dollars ($ 25) of the seventy five dollar fee ($ 75) is deposited in the General Fund for the Center for Alcohol Studies Endowment. Five cents from the issuance of each driver’s license and duplicate license is credited to the
47
License to Give Trust Fund, an online organ donor program. Some of the revenue collected under the Special ID Cards is used to offset DMV operating expenses.
TAX CALENDAR
License fees and other charges are due at the time of purchase of the license or service.
COMPARISON WITH OTHER STATES
North Carolina's driver's license tax is a multifaceted levy consisting of several components. Comparative information was only obtained on operator's license fees. All 50 states levied operator's license fees. Operator's licenses are typically for a four- year period, with only a handful of states ( including North Carolina) having a different license period. Converting these license fees to an annual basis, rates ranged from $ 1.46 to $ 13.65. The average fee in the nation is $ 6.10. North Carolina's annual fee is $ 4.00. Thirty six states had a higher levy than North Carolina. North Carolina has the fourth lowest rate of the southeastern states ( 1). Of the most populated states, North Carolina ranked tenth ( 2).
Table 22
Distribution of Driver’s License Fees
2005
Fees
Number of States
$ 1.00 - $ 1.99
4
2.00 - 2.99
6
3.00 - 3.99
3
4.00 - 4.99
7
5.00 and Above
30
( 1)
Georgia, Kentucky, North Carolina, South Carolina, Tennessee, and Virginia.
( 2)
California, Georgia, Florida, Illinois, Michigan, Ohio, Pennsylvania, New Jersey, New York, North Carolina, Texas.
Source: Department of Transportation, Highway Taxes and Fees, U. S. Federal Highway Administration, Washington, D. C., 2006.
48
FINANCIAL SECURITY RESTORATION FEES
Owners of a registered motor vehicle, operating on the roads of this state, must maintain financial responsibility through liability insurance coverage on each vehicle throughout the period of registration. When liability coverage lapses and the registration restored, the owner is charged a civil penalty.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 23
Highway Fund Financial Security Restoration Fee Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
8,445,869
20.6
0.7
2000- 01
10,263,535
21.5
0.8
2001- 02
12,716,831
24.0
1.0
2002- 03
14,479,061
14.0
1.2
2003- 04
15,068,442
4.1
1.1
2004- 05
4,764,996
- 68.4
0.3
2005- 06
5,540,080
16.3
0.3
2006- 07
5,483,096
- 1.0
0.3
BASE AND RATE
{ G. S. 20- 309} When notice of a lapse of insurance is received by the Division of Motor Vehicles, the owner is given 10 days to certify to the Division that the vehicle was covered for liability purposes on or prior to the effective date of such termination. In the case of lapsed liability insurance coverage, in order for the owner to restore the registration, the owner must certify to the Division that the vehicle is covered for liability insurance purposes and pay to the Division a civil penalty of $ 50.00.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
TAX CALENDAR
Payment is made at the time of restoration.
COMPARISON WITH OTHER STATES
Most states require the owner of a motor vehicle to prove financial responsibility for the operations of a vehicle on public road ways. While similar, penalties vary widely with regard to the type and amount of financial responsibility.
Source: Department of Transportation, Highway Taxes and Fees, U. S. Federal Highway Administration, Washington, D. C., 2006.
49
GASOLINE INSPECTION TAX
Petroleum products and related substitutes used in heating and power generation are subject to inspection. The purpose of the inspection tax is to ensure the quality of the products being sold to the public and to prevent reprehensible practices.
ADMINISTERED BY
Department of Revenue
Department of Agriculture
Table 24
Highway Fund Gasoline Inspection Tax Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
12,278,488
- 1.7
1.1
2000- 01
12,803,620
4.3
1.0
2001- 02
12,938,330
1.1
1.0
2002- 03
13,450,770
4.0
1.1
2003- 04
13,881,390
3.2
1.0
2004- 05
15,195,902
9.5
1.1
2005- 06
14,577,283
- 4.1
1.0
2006- 07
14,907,956
2.3
1.0
BASE AND RATE
{ G. S. 119- 18( a)} An inspection tax of one fourth of one cent ( 1/ 4 of 1¢) per gallon is levied on all petroleum products used as fuels. This includes gasoline, diesel, blended fuels, alternative fuels, kerosene, and fuels exempt from the excise tax on motor fuels. Aviation fuels are also subject to the inspections tax. ( For additional information on motor fuel taxation, see Articles 36C and 36D of Chapter 105 of the North Carolina General Statutes.)
DISTRIBUTION
The revenue from the gasoline inspection tax is used to fund the administration and enforcement of the tax by the by the Departments of Revenue and Agriculture under Articles 36C and 36D of Chapter 105. The balance of the revenue is credited on a monthly basis to the Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund and the Noncommercial Leaking Petroleum Underground Storage Tank Cleanup Fund. If the amount of revenue in the Noncommercial Fund at the end of a month is at least five million dollars ($ 5,000,000), one- half of the remainder of the proceeds shall be credited to the Noncommercial Fund and one- half of the remainder of the proceeds shall be credited to the Commercial Fund.
50
TAX CALENDAR
{ G. S. 119- 18( a)} The inspection tax on motor fuel is due and payable to the Secretary of Revenue at the same time as the excise tax on motor fuel is due. ( See G. S. 105- 449.90} The inspection tax on alternative fuels is due monthly within 25 days after the end of the month. The inspection tax on kerosene is payable monthly to the Secretary by the supplier. Monthly reports on kerosene are due by the 22nd of each month, and apply to sales during the preceding month.
COMPARISON WITH OTHER STATES
As of January 2006, 18 states levied gasoline inspection taxes with rates ranging from 0.00025 cent per gallon to $ 15.00 per gallon. However, in most cases the set of petroleum products taxed is different. Three states have higher fees than North Carolina, one the same, eleven lower, and two unknown.
Source: Department of Transportation, Highway Taxes and Fees, U. S. Federal Highway Administration, Washington, D. C., 2006.
51
INTERNATIONAL REGISTRATION PLAN
The International Registration Plan is a reciprocity agreement for motor carriers in the U. S., District of Columbia, and Canada. The Plan is a federally encouraged program to facilitate commercial vehicle registrations and operations among the states and Canadian Providences.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 25
Highway Fund International Registration Plan Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
54,694,488
7.7
4.8
2000- 01
47,494,993
- 13.2
3.8
2001- 02
49,909,132
5.1
4.0
2002- 03
45,039,506
- 10.0
4.0
2003- 04
47,623,500
5.74
4.0
2004- 05
49,789,517
5.0
4.0
2005- 06
66,013,231
32.6
4.0
2006- 07
68,385,177
3.6
4.0
BASE AND RATE
{ G. S. 20- 87.1} North Carolina has participated in the International Registration Plan ( IRP) since 1977. The IRP is the registration reciprocity compact among states, the District of Columbia, and Canadian Provinces. Vehicles licensed under the International Registration Plan are owned and operated by registrants of member jurisdictions. Registered vehicles are known as apportion vehicles and pay license fees based on fleet distance operated in member jurisdictions. Registered fleets are granted full intrastate and/ or interstate reciprocity and require the issuance of one plate and one cab card per fleet vehicle. The Plan defines a fleet vehicle as one or more apportion- able vehicles.
The weight and rate schedule under this plan follows:
52
Table 26
Schedule of Weights and Rates
( Per 100 lbs. of Gross Weight)
Weight/ Rate
Bracket
Farm
Non- Farm
Up to 4,000 lbs.
$. 29
$. 59
4,001 to 9,000 lbs.
.40
.81
9,001 to 13,000 lbs.
.50
1.00
13,001 to 17,000 lbs.
.68
1.36
Over 17,000 lbs.
.77
1.54
Vehicles in the “ over 17,000” pounds category pay an additional tax of $ 3.00. Replacement plates for all vehicles are $ 9.
{ G. S. 20- 385} ADDITIONAL FEES FOR INTERSTATE MOTOR CARRIERS
1.
Insurance verification for each for- hire motor carrier operated in the state, $ 1.00.
2.
Application by interstate motor carrier for certificate of exemption, $ 45.00.
3.
Certification by an interstate motor carrier that is not regulated by the U. S. Department of Transportation, $ 45.00.
4.
Emergency permits for interstate motor carrier, $ 18.00.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
TAX CALENDAR
License fees are computed according to the percentage of miles driven in each jurisdiction for the preceding fiscal year beginning on the first of July. Effective October 2005 for the 2006 registration year, the annual renewal period for the purchase of plates is staggered.
COMPARISON WITH OTHER STATES
In 2006, 10 Canadian provinces and the 48 contiguous states participated in the International Registration Plan ( IRP). For the 48 states that are in the IRP ( for five axle tractor trailers) the registration fees are determined according to the weight of the vehicle and the percentage of distance driven in each jurisdiction ( participating state) for the preceding year. Because of the manner in which the fees are calculated, it is difficult to compare them across states.
Source: Department of Transportation, Highway Taxes and Fees, U. S. Federal Highway Administration, Washington, D. C., 2006.
53
MOTOR FUELS EXCISE TAX
The state levies an excise tax on all motor fuels including alternative motor fuels sold, distributed, and used to power motor vehicles operating on public roads of the state. The revenue collected from the tax is split between the Highway Fund and the Highway Trust Fund. The Highway Fund portion is 75% of collections.
ADMINISTERED BY
Department of Revenue
Department of Transportation Division of Motor Vehicles
Table 27
Highway Fund Motor Fuel Excise Tax Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund
Fiscal Year
Tax Collections
Change
Tax Collections
1999- 00
781,017,763
2.4
68.2
2000- 01
867,815,163
11.1
69.7
2001- 02
888,128,994
2.3
69.3
2002- 03
848,372,049
- 4.5
68.3
2003- 04
935,531,825
10.3
69.3
2004- 05
956,651,016
2.6
68.5
2005- 06
1,100,801,379
14.5
66.0
2006- 07
1,186,563,036
7.8
66.0
BASE AND RATE
{ G. S. 105- 449.80} The motor fuels excise tax is levied on the wholesale price of motor fuel. The excise tax has a fixed rate of 17.5 cents per gallon plus a variable component rate that is 7% of the average wholesale price of motor fuels. The excise tax on motor fuels is computed and set twice a year in January and July and cannot fall below 3.5 cents per gallon.
Base period: January 1, 2008 base rate is .299 cents
July 1, 2008 base rate is .299 cents
Note: By actions of the 2007 General Assembly, the rate will remain at 29.9 cents until July 2009.
BASE PERIOD
The first base period is the six months ending on the 30th of September. The second base period is the six months ending on the 31st of March.
January Base Period = April, May, June, July, August, September
6
54
July Base Period = October, November, December, January, February, March
6
Computation of the Wholesale Component for the base period:
a.
Compute the 6 month average sales price of “ finished” gasoline
b.
Compute the 6 month average sales price of # 2 diesel fuel
c.
Compute the weighted average of the results of the first two calculations based on the proportion of the tax collected on gas and diesel.
Gas Weighted Average = Total Taxable Gallons Gas
Gas Taxable Gallons
Diesel Weighted Average = Total Taxable Gallons Diesel
Diesel/ Special Fuel Taxable Gallons
d. Sum the weighted averages and multiply times 7%
e. Round up to the nearest 1/ 10 of a cent
EXEMPTIONS
{ G. S 105- 449.88} Fuel sold to the U. S. Government, state government agencies, N. C. counties or municipal corporations, N. C. community colleges, local boards of education for use in public or charter school transportation ( including fuel for automobiles owned by school boards), motor fuel removed from a terminal for export for which the supplier collects the excise tax at the rate of the destination state is exempt from this tax. Diesel that is kerosene sold to an airport is exempt from the tax.
QUARTERLY REFUNDS
{ G. S. 105- 449.106} A refund of the excise tax paid less one cent per gallon is given to the following: volunteer fire departments, sheltered workshops recognized and approved by the Department of Human Resources, volunteer rescue squads, taxicabs transporting fare- paying passengers, private nonprofit organizations operating motor vehicles under contract or at the express designation of a unit of local government, and off- highway use of special mobile equipment.
ANNUAL REFUNDS
{ G. S. 105- 449.107} A refund of the average excise tax paid is given for purchases of fuel not used on the highway. The refund is based on the excise tax paid on fuel used in the preceding calendar year. There is a refund of 33 1/ 3% of the average tax paid on fuel used in concrete mixing vehicles, solid waste compacting vehicles, commercial vehicles that deliver and spread mulch, soil and similar materials, and certain agricultural and tank delivery vehicles.
DISTRIBUTIONS
{ G. S. 105- 449.125} Of the tax collected, 1/ 2 cent per gallon is dedicated as follows:
1.
Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund, 19/ 32
55
2.
Noncommercial Leaking Petroleum Underground Storage Tank Cleanup Fund, 3/ 32
3.
Water and Air Quality Account, 5/ 16.
Of the remaining revenue, 75% remains in the Highway Fund, and 25% is allocated to the Highway Trust Fund. All motor fuel tax collections credited to the Highway Trust Fund are used for highway construction. Only Highway Fund revenue is shown above.
ADDITIONAL DISTRIBUTION
{ G. S. 105- 449.126} The Wildlife Resources Fund receives 1/ 6 of 1% of the excise tax on motor fuels that is allocated to the Highway Fund. The revenues received under this distribution are annual and are used for boating and water safety activities.
POWELL BILL DISTRIBUTION
{ G. S. 136- 41.1} In October of each year, one and three fourths cents ( 1 ¾ ) of the net tax on each gallon of motor fuel and alternative fuels sold or distributed in the state is appropriated from the Highway Fund. This appropriation is made to eligible cities and towns for street maintenance. The funds appropriated from the Highway Fund are based on collections during the fiscal year preceding the distribution date. Seventy five percent ( 75%) is distributed based on population and twenty five percent ( 25%) is distributed based on public road mileage.
TAX CALENDAR
{ G. S. 105- 449.90} The motor fuels excise tax is collected by wholesale distributors of motor fuels on purchases made from major oil companies at the terminal rack. The excise tax collected on motor fuels is paid to the Secretary of Revenue either annually, quarterly, or monthly. Annual returns are due 45 days after the end of the calendar year. Quarterly returns are due by the last day of the month that follows the end of the calendar quarter. Monthly returns are due within 22 days after the end of the month. A monthly return of an occasional importer is due by the third day of each month.
COMPARISON WITH OTHER STATES
All states levy motor fuel taxes on gasoline, diesel fuel, and gasohol. In addition, several states have different levies on jet and other fuels. Sales taxes are applied on motor fuels in addition to the excise tax in nine states, and separate local motor fuel taxes are applied in selected jurisdictions in nine states.
As of January 2006, state excise taxes on gasoline ranged from 7.5 cents per gallon to 34 cents per gallon. The average state gasoline tax was 24.6 cents per gallon. North Carolina's rate was 29.9 cents per gallon, and was the fifth highest tax in the nation. The average motor fuels tax in the southeastern states was 19.82 cents per gallon, and the average for the eleven most populated states was 20.22 cents per gallon. North Carolina had the highest tax rate among the southeastern states, and ranked second among the eleven most populated states. North Carolina is one of seven states that have a variable motor fuel excise tax rate.
56
Table 28
Gasoline Excise Tax Rates for the U. S., North Carolina
and Surrounding States
January 2007
State
Tax Rate
United States
24.60
Southeast
19.82
Eleven Largest States
20.22
North Carolina
29.90
Surrounding States
Georgia
7.50
Kentucky
18.50
North Carolina
29.90
South Carolina
16.00
Tennessee
20.00
Virginia
27.00
Source: State Department of Revenue Sources, © American Road and Transportation Builders Association, 2007, updated February 2007
57
OVERWEIGHT/ OVERSIZE PERMITS
Vehicles that exceed the state’s maximum size and weight standards to move or operate on public roads may apply for and be issued an overweight and oversize permit. Generally, such permitting applies to the movement of construction vehicles and mobile and modular homes.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 29
Highway Fund Overweight/ Oversize Permit Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
2,488,424
2.0
0.2
2000- 01
5,261,816
111.5
0.4
2001- 02
6,359,366
21.0
0.5
2002- 03
5,024,634
- 21.0
0.4
2003- 04
3,444,149
- 31.5
0.3
2004- 05
7,349,815
113.4
0.5
2005- 06
6,649,860
- 9.5
0.4
2006- 07
6,754,596
2.0
0.4
BASE AND RATE
{ G. S. 20- 119} Upon receipt of application, the state may issue at its discretion, special permits granting permission to operate overweight/ oversize motor vehicles on North Carolina highways. The single trip permit fee for oversize vehicles is $ 12.00 for each dimension over the lawful dimensions including height, length, width, and weight up to 132,000 pounds. The single trip permit for overweight vehicles is $ 3.00 per 1,000 pounds over 132,000 pounds. The annual permit fee for moving house trailers is $ 200.00 and for other commodities is $ 100.00. The application fee for a permit that requires an engineering study for pavement or structures is $ 100.00.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
TAX CALENDAR
Revenue is received at the time the permit is issued.
COMPARISON WITH OTHER STATES
A comparison with other states was not taken.
58
PENALTIES
The state sets standards for the size and loads of vehicles operating on public roads. When the maximum standards are violated, and for which no special use permit has been issued, the owner and/ or operator can be charged a penalty.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 30
Highway Fund Overweight/ Oversize Permit Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
8,453,829
4.8
0.7
2000- 01
13,263,785
56.9
1.1
2001- 02
15,300,462
15.4
1.2
2002- 03
16,003,526
5.0
1.3
2003- 04
18,366,061
15.0
1.4
2004- 05
34,262,047
86.6
2.4
2005- 06
35,522,264
3.7
2.0
2006- 07
38,969,065
9.7
2.2
BASE AND RATE
{ G. S. 20- 118} Lists the maximum weight by axle group
{ G. S 20- 118( e) ( 3)} For each violation of the license, permit, or axle grouping weight as established in { G. S. 20- 118 ( b) ( 3)}, the owner must pay to the Division of Motor Vehicles, a penalty, per violation, as listed in the following table.
Table 31
Violation by Weight
Amount of Pounds
Penalty Per
Over Maximum
Pound
First 2000 lbs.
2 cents
Second 3000 lbs.
4 cents
In excess of 5000 lbs.
10 cents
{ G. S. 20- 118( e) ( 1)} For each violation of axle weight as established by G. S. 20- 118 ( b)( 1), ( b)( 2), and ( B)( 4) the owner must pay the Division of Motor Vehicles a penalty, per violation as listed in the following table. ( See statute for further explanation.)
59
Table 32
Violation by Single or Tandem Axle
Amount of Pounds
Penalty Per
Over Maximum
Pound
First 1000 lbs.
4 cents
Second 1000 lbs.
6 cents
In excess of 2000 lbs.
10 cents
Note: The violations listed are a representation of the penalties levied by type of fine. For a complete listing please see the Motor Vehicle Laws of North Carolina.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
TAX CALENDAR
Payments are due at the time the penalty is issued.
COMPARISON WITH OTHER STATES
A comparison is hard to make between states. Most states do levy penalties for violation of size and weight limits. However, penalties by axle weight are not uniform across all states.
60
MISCELLANEOUS REGISTRATION FEES
Fees are charged for certificates of title, registration cards ( including special identification cards), and the registration plates for motor vehicles.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 33
Highway Fund Overweight/ Oversize Permit Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
2,687,772
8.0
0.2
2000- 01
2,594,868
- 3.5
0.2
2001- 02
2,585,980
- 0.3
0.2
2002- 03
2,595,095
0.4
0.2
2003- 04
2,786,678
7.4
0.2
2004- 05
2,743,180
- 1.6
0.2
2005- 06
3,656,707
33.3
0.2
2006- 07
3,956,385
8.2
0.2
BASE AND RATE
Charges are rendered for the following items:
{ G. S. 20- 37.7} $ 15.00 for the issuance of a special identification card
{ G. S. 20- 85} $ 40.00 certificate of title application
$ 15.00 to issue, duplicate, repossess a certificate of title
$ 15.00 to transfer, replace, duplicate registration card and plates
$ 15.00 to apply for and remove a lien from a certificate of title
$ 15.00 for each salvage certificate of title
$ 25.00 for each set of replacement Stock Car Racing Theme Plate
{ G. S. 20- 73( c)} $ 15.00 fee for failure to transfer title of ownership
{ G. S. 20- 42( b)} $ 10.00 fee to certify any DMV document for use in court
$ 5.00 for each accident report
DISTRIBUTION
Legislative changes in 1989 did not identify some of these fees as Highway Trust Fund Revenues. The revenue collected from these fees is credited to the Highway Fund for general highway purposes. Some of the revenue from the issuance of special ID card is used to off- set DMV operating expenses.
61
TAX CALENDAR
These fees are collected on a daily basis.
COMPARISON WITH OTHER STATES
A comparison with other states was not taken.
62
SAFETY EQUIPMENT PROCESS FEES
All motor vehicles subject to registration by the Division of Motor Vehicles are required to pass an annual safety inspection. Vehicles registered in certain counties are required to pass both a safety and an emission inspection.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 34
Highway Fund Safety Equipment Processing Fee Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
4,255,866
4.1
0.4
2000- 01
4,010,440
- 5.8
0.3
2001- 02
4,024,782
0.4
0.3
2002- 03
4,264,217
6.0
0.3
2003- 04
4,421,842
4.0
0.3
2004- 05
4,553,823
3.0
0.3
2005- 06
4,883,720
7.2
0.3
2006- 07
1,977,959
- 60.0
0.1
BASE AND RATE
{ G. S. 20- 183.7} The safety equipment inspection fees total $ 9.10 per vehicle inspected. Of that amount, $ 8.25 is for the inspection and remains with the inspection station. The remaining $ 0.85 is for the inspection sticker, with $ 0.55 going to the Highway Fund, $ 0.18 earmarked to the Department of Insurance for the Volunteer Rescue/ EMS Fund, and $ 0.12 dedicated to the Rescue Squad Workers’ Relief Fund.
The inspection fee for inspecting both safety and exhaust standards is $ 30.00 per vehicle. Of that amount, $ 23.50 is for the inspection and remains with the inspection station. The remaining $ 6.50 is for the inspection sticker. Of this amount, $ 3.00 goes to the emission program account, $ 1.75 goes to the telecommunications account, $ 0.65 is allocated to the Division of Air Quality, $ 0.55 goes to the Highway Fund, $ 0.25 goes to the Highway Trust Fund Repayment Fees, $ 0.18 is distributed to the Department of Insurance for the Volunteer Rescue/ EMS Fund, and $ 0.12 for the Rescue Squad Relief Fund.
Note: Effective July 1, 2007, the distribution in the fee amount for the Emissions and Safety Inspection changed from $ 23.50 to $ 23.75 and the corresponding amount for the Emissions and Safety Sticker is changed from $ 6.50 to $ 6.25. This change in the fee structure reduces the $. 25 allocation to the Division of Motor Vehicles from the Highway Trust Fund for the implementation of the vehicle emissions and maintenance program.
63
Inspections are required for both safety and emissions systems in the following counties: Alamance, Cabarrus, Catawba, Chatham, Cumberland, Davidson, Durham, Franklin, Forsyth, Gaston, Guilford, Iredell, Johnston, Lee, Lincoln, Mecklenburg, Moore, Orange, Randolph, Stanly, Rowan, Union, and Wake.
The phase- in dates for those counties that require the additional emissions inspections are below:
[ Effective July 1, 2004]
Buncombe, Cleveland, Granville, Harnett, and Rockingham counties
[ Effective January 1, 2005]
Edgecombe, Lenoir, Nash, Pitt, Robeson, Wayne, and Wilson counties
[ Effective July 1, 2005]
Burke, Caldwell, Haywood, Henderson, Rutherford, Stokes, Surry, and Wilkes counties
[ Effective January 1, 2006]
Brunswick, Carteret, Craven, New Hanover, and Onslow counties
DISTRIBUTION
Revenue from safety inspections is divided between the inspection station and the state as stated under " Base and Rate." In addition, revenue from emission inspections is placed under a separate account, and is used to support the emission program. Only Highway Fund revenue is shown above.
TAX CALENDAR
Revenue is collected at the time of the inspection.
COMPARISON WITH OTHER STATES
A comparison with other states was not taken.
64
STAGGERED REGISTRATION FEES
All private passenger vehicles, vehicles for hire, motorcycles, certain mobile homes, and some special mobile equipment are required to be registered with the Division of Motor Vehicles before such vehicles can legally operate on public roads. A vehicle registration is for a 12 month period generally from the date the title is issued or transferred.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 35
Highway Fund Staggered Registration Fee Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
145,624,292
4.7
12.7
2000- 01
147,014,471
1.0
11.8
2001- 02
149,565,091
2.0
12.0
2002- 03
151,932,070
2.0
12.0
2003- 04
158,680,221
4.4
12.0
2004- 05
160,037,750
1.0
11.4
2005- 06
187,563,245
17.2
11.2
2006- 07
199,209,664
6.2
11.0
Note: Increase in fees effective October 2005; partial year collections FY 2005/ 06
BASE AND RATE
{ G. S. 20- 87} All private passenger vehicles ( automobiles and motorcycles) and all private property hauling vehicles licensed for 4,000 pounds ( private pick- up trucks and vans) are required to enter the staggered registration plan. A fee of $ 28.00 is levied on private passenger cars of 15 passengers or less, and a fee of $ 31.00 is levied on private passenger cars of more than 15 passengers ( Buses). Private passenger motorcycles pay a license plate fee of $ 15.00, except when designed to transport property or additional passengers, and the tax is then $ 22.00. An additional fee of $ 3.00 is imposed on the registration of each private motorcycle and the proceeds are used to fund the Motorcycle Safety Instruction Program.
{ G. S. 20- 87( 2)} U- Drive It Vehicles with the capacity to transport 15 or fewer passengers pay a license pate fee of $ 51.00. House trailers pay an $ 11.00 license fee in lieu of other registration fees. The fee for busses is $ 33.00. Automobile Dealers pay $ 28.00 per plate up to 5 plates and $ 14.00 for each plate over 5 plates.
{ G. S. 20- 88( b)( 1)} Private pick- up trucks and vans licensed for 4,000 pounds pay a license plate fee of $ 28.00.
65
{ G. S. 20- 88( c)} Boat trailers, utility trailers and semi- trailers pay a license plate fee of $ 19.00.
{ G. S. 20- 85.1} There is a $ 1 processing charge for registrations by mail.
{ G. S. 20- 50} The fee to issue a temporary 10 day plate is $ 5.00.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
TAX CALENDAR
All registrations are for a twelve- month period from the date of the vehicle's initial registration.
COMPARISON WITH OTHER STATES
All 50 states levy automobile registration fees. Fees may be based on vehicle weight, number of passengers carried, engine size, horsepower, retail price, or some combination of the above. Rates often vary within a state depending on the vehicle. Tax rates for the typical automobile ranged from $ 7.50 to $ 209.00. The median tax rate for the nation was $ 62.00. Thirty seven states had a higher automobile registration fee than North Carolina.
The average rate among the southeastern states( 1) and the 11 most populated states( 2) was $ 25.00 and $ 61.00 respectively. North Carolina ranked second in the southeastern states and next to last among the largest states. A comparison of registration fees for small trucks and motorcycles was not undertaken.
( 1)
Georgia, Kentucky, North Carolina, South Carolina, Tennessee, and Virginia.
( 2)
California, Georgia, Florida, Illinois, Michigan, Ohio, Pennsylvania, New Jersey, New York, North Carolina, Texas.
Source: Department of Transportation, Highway Taxes and Fees, U. S. Federal Highway Administration, Washington, D. C., 2007
66
TRUCK LICENSE PLATE FEES
All commercial property- hauling vehicles are required to be registered with regard to weight and load capacity. Effective January 1, 2006, all commercial property hauling vehicles with an annual expiration date fall under a staggered registration plan.
ADMINISTERED BY
Department of Transportation Division of Motor Vehicles
Table 36
Highway Fund Truck License Plate Fee Collections
Annual
Percent of
Highway Fund
Percent
Highway Fund Tax
Fiscal Year
Collections
Change
Collections
1999- 00
59,519,842
4.8
5.2
2000- 01
60,570,817
1.8
4.9
2001- 02
61,474,240
1.5
5.0
2002- 03
61,838,112
0.6
5.0
2003- 04
66,816,761
8.1
5.0
2004- 05
71,265,550
7.0
5.1
2005- 06
126,061,965
77.0
7.5
2006- 07
137,651,224
9.2
7.6
Note: Increase in fees effective October 2005; partial year collections FY 2005/ 06
BASE AND RATE
{ G. S. 20- 88( 1)} For the purpose of taxation, the determination of weight is based on combined gross vehicle weight. A minimum fee of $ 24.00 for a farm vehicle and $ 28.00 for a non- farm vehicle is levied under this schedule.
Vehicles in the truck category consist of private vehicles such as vans and pick- up trucks over 4,000 pounds, and commercial trucks. Commercial trucks generally carry their own products both interstate and intrastate, but do not operate under the authority of either the Interstate Commerce Commission or the North Carolina Utilities Commission. They basically include service trucks, milk trucks, soft drink bottle trucks, beer trucks, and others. There is no separate commercial truck license plate.
Vehicles in the truck category are subject to taxation according to the following rate and weight schedule:
67
Table 39
SCHEDULE OF WEIGHTS AND RATES
( Per 100 lbs. of Gross Weight)
Weight/ Rate Bracket
Farm
Non- Farm
Up to 4,000 lbs.
$ 0.29
$ 0.59
4,001 to 9,000 lbs.
0.40
0.81
9,001 to 13,000 lbs.
0.50
1.00
13,001 to 17,000 lbs.
0.68
1.36
Over 17,000 lbs.
0.77
1.54
{ G. S. 20- 88( 6)} The annual plate and registration fee for wreckers fully equipped weighing 7,000 pounds or less is $ 75 and those over 7,000 pounds pay $ 148.
{ G. S. 20- 88( 6)( c)} A multi- year license plate for trailers or semi- trailers is available for $ 75. A multi- year license plate and registration card are valid until the owner transfers the title or surrenders the plate and registration to the Division of Motor Vehicles.
Replacement plates for all vehicles are $ 10.
DISTRIBUTION
Revenue is deposited in the Highway Fund for highway purposes.
TAX CALENDAR
Under the annual renewal plates were purchased between