DIRECTIVE


Subject: Additional ½% Mecklenburg County Sales and Use Tax for Public Transportation
Tax:Local Sales and Use Tax
Statute: G.S. 105-505 through G.S. 105-510, as enacted by Chapter 417 of the 1997 Session Laws
Issued By: Sales and Use Tax Division
Date:February 26, 1999
Number: SD-99-1

This Directive gives a general explanation of the new Mecklenburg County ½% local sales and use tax for public transportation. Sales and Use Tax Technical Bulletin Number 49-2 gives more information and examples on the application and payment of the new tax.

The new Mecklenburg County ½% local sales and use tax for public transportation becomes effective April 1, 1999. The tax is referred to as a "public transportation" tax because the proceeds of the tax must be used for that purpose. The 1997 General Assembly authorized the Mecklenburg County Commissioners to impose the tax. On February 16, 1999, the Mecklenburg County Commissioners adopted a resolution imposing the tax effective April 1, 1999. The North Carolina Department of Revenue is responsible for administering the new tax.

The new ½% Mecklenburg local sales and use tax is in addition to the existing State and local sales and use taxes. The existing, general State sales and use tax rate is 4% and the existing Mecklenburg local sales and use tax rate is 2%. With the new ½% rate, the combined general rate of State and local sales and use taxes for Mecklenburg County is 6½% rather than 6%.

Scope of Tax
The new ½% Mecklenburg local sales and use tax applies to the same transactions to which the existing 2% local sales and use tax applies, with two exceptions. The first exception is for food that can be purchased under the Food Stamp Program. Food that can be purchased under the Food Stamp Program is subject to the existing 2% Mecklenburg local sales and use tax but is exempt from the new ½% Mecklenburg local sales and use tax for public transportation.

The second exception is for certain building materials. The new ½% Mecklenburg local sales and use tax does not apply to building materials purchased by contractors for the purpose of fulfilling lump sum or unit price contracts that are entered into or awarded before April 1, 1999, or are entered into or awarded pursuant to a bid made before April 1, 1999. Contractors must complete Form E-589A, Affidavit to Exempt Contractors From the Additional ½% Mecklenburg County Sales and Use Tax For Public Transportation, and furnish it to their vendors to support an exemption from the new ½% tax.

The exemptions in G.S. 105-164.13 and the refund provisions in G.S. 105-164.14 apply to the new ½% Mecklenburg local sales and use tax for public transportation. Consequently, items that are exempt from the 2% Mecklenburg local sales and use tax are also exempt from the new ½% tax. Motor vehicles, for example, are exempt from the 2% tax and are therefore exempt from the new ½% tax.

Entities that are eligible for a refund of the 2% Mecklenburg local sales and use tax are also eligible for a refund of the new ½% tax. An entity that is eligible for a refund of the new ½% tax must file a separate application for refund. The refund application for the existing 6% combined State and local sales and use taxes does not include the new ½% Mecklenburg local sales and use tax.

Collection and Payment of Tax
Retailers that are engaged in business in Mecklenburg County must collect the new ½% Mecklenburg local sales tax and remit it to the Department. A retailer is engaged in business in Mecklenburg County if any of the following applies:

  1. The retailer has a business location in Mecklenburg County at which the retailer sells or leases tangible personal property.
  2. The retailer does not have a business location in Mecklenburg County but the retailer does any of the following:
    1. Has an inventory of tangible personal property in Mecklenburg County and offers it for sale or lease.
    2. Leases or rents tangible personal property that is used in Mecklenburg County and does not have an inventory of property in any county in this State.
    3. Has a business location in North Carolina and has sales representatives who solicit orders in Mecklenburg County for sales or leases of tangible personal property and have the authority to accept and approve the orders taken in the county.
    4. Does not have a business location in North Carolina and has sales representatives who solicit orders in Mecklenburg County for sales or leases of tangible personal property.

Business entities or individuals who purchase tangible personal property outside Mecklenburg County for storage, use, or consumption in that county must remit the new ½% Mecklenburg local use tax to the Department. Use tax is due, for example, when a business located in Mecklenburg County orders equipment for use at its Mecklenburg location from a retailer that is in North Carolina but is not engaged in business in Mecklenburg County. Similarly, use tax is due when an individual whose residence is in Mecklenburg County buys merchandise from a mail-order retailer that does not collect the tax due.

A retailer that is liable for the new ½% Mecklenburg local sales tax or a business entity that is liable for the new ½% Mecklenburg local use tax must report the tax to the Department on Form E-500M, Mecklenburg Public Transportation Sales and Use Tax Return. The Department will mail a supply of these forms to taxpayers who have recently remitted the 2% Mecklenburg local sales and use tax to the Department. The new ½% Mecklenburg local sales and use tax cannot be reported on the form that is used to report State sales and use tax and the 2% local sales and use tax. It must be reported on new form E-500M.

Form E-500M must be filed for each filing period of the taxpayer and must show taxable receipts and purchases. A taxpayer who makes no taxable sales or taxable purchases during a reporting period must nevertheless file a return indicating that no tax is due. A taxpayer must file form E-500M on the same filing frequency used to file existing State and local sales and use taxes. Taxes reported on Form E-500M must be paid by check to the Department. At this time, the tax cannot be remitted by electronic funds transfer. The Department will notify taxpayers when electronic funds transfer is available. A taxpayer who is liable for the tax but does not receive preprinted forms by April 15, 1999, should contact the Department by calling the office or Division listed at the end of this Directive.

An individual who is liable for the new ½% Mecklenburg local use tax on non-business purchases must report the tax to the Department on an annual basis on a form provided by the Department. The form is due when the individual income tax return is due. The Department is developing the form to use for this purpose.

Questions
If you have questions about this Directive or the new ½% Mecklenburg local sales and use tax, you may contact the Department's Charlotte Revenue Office located at 500 West Trade Street, telephone number (704) 342-6124. You may also contact the Office Services Division, North Carolina Department of Revenue, Post Office Box 25000, Raleigh, North Carolina 27640, telephone number (919) 733-3661. Sales and Use Tax Technical Bulletin 49-2 can be obtained from the Department's Charlotte office or its Raleigh Office Services Division.