Privilege license taxes issues

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One of the next steps in tax reform in North Carolina may involve privilege license taxes that cities impose on businesses, but how far lawmakers will pursue the topic in this year’s legislative session remains unclear.

Earlier this month, after getting complaints from business owners about what they perceive as unfair and unreasonable privilege taxes being imposed by some cities, several state lawmakers said they wanted to address the issue. At the end of a discussion by the Revenue Laws Study Committee last week, Sen. Dan Clodfelter, D-Mecklenburg, said he hoped there was interest on the committee for drafting legislation. “I believe there is,” responded Rep. Julia Howard, R-Davie, a committee co-chairwoman.

Privilege license taxes were part of tax reform discussions last year, but didn’t make it into the final legislation passed by the General Assembly. Business representatives who spoke to the committee said now is the time to make a change.

“The people of North Carolina would never stand for this type of a tax on the state level, and we shouldn’t have to deal with it on a local level either,” said Lynn Ford of Ford’s Produce in Raleigh, which employs about 65 people. “We talk all the time about improving the business climate in the state, but that applies to the influence from the state and from the local governments.”

About 300 of the state’s 540 municipalities impose privilege taxes on businesses. More than $60 million was collected statewide in 2011-12, according to Chris McLaughlin, an assistant professor at the UNC School of Government who addressed the Revenue Laws committee. State law gives cities fairly wide latitude to charge the taxes, although it exempts some types of businesses — including medical practices, law firms and banks — and includes statewide caps on what cities can charge other types of businesses. Automobile dealers, for example, can be charged only $25 a year and building contractors, $10.