B. Installment Paper Dealers (G.S. 105-83)
- Basis for Taxation
Every person engaged in the business of dealing in, buying, or
discounting installment paper, notes, bonds, contracts, or evidences
of debt, where at the time of or in connection with the execution
of said instruments, a lien is reserved or taken upon personal
property located in this State to secure the payment of such obligations,
is subject to the installment paper dealers tax. The primary factors
in determining liability are: (a) three party transactions, (b)
obligations concerning personal property and (c) liens reserved
upon personal property in this State to secure payment of such
Example: A motor vehicle dealer sells an automobile (personal
property) and accepts a retail installment contract from the customer.
A lien is reserved on the title of the vehicle. The dealer sells
or assigns the retail installment contract to a third party. The
purchaser of the retail installment contract from the dealer is
liable for the installment paper dealers' tax.
- Additional Tax and Reports (Sections .2903 & .2904)
Form B-203, Installment Paper Dealer Quarterly Report, is used
to remit the tax at the rate of .277 percent of the total face
value of paper subject to the tax. Face value is normally the
amount financed, excluding finance charges. The quarterly report,
with remittance, is due no later than the twentieth day of January,
April, July and October of each year.
- Nonresident Engaged in Business (Section .2905)
This tax is not imposed on the business of dealing in, buying
and/or discounting installment paper which is engaged in exclusively
in a foreign state. When any of the activity incident to such
business occurs in North Carolina, the tax applies. Such activities
include the promotion and solicitation of such business by employees
or agents within this State, whether or not the transfer of such
paper is consummated in this State.
- Liability for Direct Loans (Section .2902)
A person who is engaged in the business of making direct loans
(two party transactions) and also purchases installment paper
(three party transactions) is subject to both the tax on installment
paper dealers (G.S. 105-83) and the tax on loan agencies (G.S.