North Carolina bill would limit local sales tax rates

By Keith Goble, Land Line state legislative editor | 7/21/2014

North Carolina counties could soon have their local sales tax amounts limited under a bill making its way through the statehouse.

A bill nearing passage in the Senate would cap local sales and use taxes a county can collect at 2.5 percent. Overall, the combined state and local sales tax would be limited to 7.25 percent.

Durham and Orange counties, which already have local sales tax rates of 2.75 cents, would be exempted from the rule. However, if either county repeals any of their local sales taxes, the proposed rule would be applied.

Counties would also be prohibited from collecting extra revenues simultaneously for education and public transportation. Instead, counties could raise sales taxes for one or the other.

HB1224 awaits further consideration on the Senate floor. If approved there, the bill would head back to the House for approval of changes before it could advance to the governor’s desk.

If approved, the bill could affect the outcome of a proposed referendum in Wake County. The county board of commissioners is expected to vote Aug. 4 on putting a question on the fall ballot asking voters to raise sales taxes by one-quarter cent to benefit education.

Critics say that the bill’s passage, combined with approval of the sales tax increase for education, would remove the possibility of tapping sales taxes to benefit transit improvements in Wake County.

The bill would also nix plans in Mecklenburg County for voters to decide this November whether to raise sales taxes by one-quarter cent for education. The county, which includes the city of Charlotte, already has a local sales tax rate of 2.5 cents.

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