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North Carolina Sales Tax Controversy


 Will sharing sales tax revenue bring North Carolina communities together, or tear them apart?

A number of services that are currently exempt from North Carolina sales tax will become taxable beginning March 1, 2016. A few months later, the state will change how it distributes certain local sales tax revenue. And not everyone in North Carolina is happy about it.

A line item in the General Fund Availability Statement section of the North Carolina budget reads, “Transfer Additional Local Sales Tax Revenue for Economic Development, Public Education, and Community Colleges … FY 2016-2017: (17,600,000).” This is explained further down:

“Distribution of additional sales tax revenue for economic development, public education, and community colleges…. The purpose of this section is to address sales tax leakage that results from the different revenue-raising capacity of local option sales taxes in each taxing jurisdiction….”

County Allocation

Beginning with local option sales taxes collected on or after July 1, 2016 and distributed to counties and cities on or after September 1, 2016, the Secretary of Revenue will allocate to each taxing county on a monthly basis “an amount equal to one-twelfth of the [predetermined] distribution amount,” multiplied by the appropriate allocation percentage. Percentages vary from 0.00% to 5.17% (Harnett County).

The following counties are slated to receive a whopping zero percent of the distributed sales tax revenue:

  • Alamance
  • Avery
  • Brunswick
  • Buncombe
  • Cabarrus
  • Carteret
  • Catawba
  • Currituck
  • Dare
  • Durham
  • Forsythe
  • Guilford
  • Iredell
  • Jackson
  • Macon
  • Mecklenburg
  • Moore
  • New Hanover
  • Surry
  • Wake
  • Watauga

This new distribution model is designed to help education and spur economic development. Yet this is confusing to the leaders of Jackson and Macon counties, both of which make the state Commerce Department’s list of economically distressed counties. Jackson County Manager Chuck Wooten feels “discouraged with the notion of residents paying an expanded sales tax and getting very little for it.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.