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NC Chamber Supports Legislative Measure Ensuring Businesses Receive Fair Tax Treatment from Municipalities

A strong pro-business bill was strengthened even further recently in the N.C. House with the addition of new language requiring North Carolina municipalities to use gross receipts taxes paid by public utilities customers for their intended purpose: local support for public utility infrastructure. The NC Chamber had already put our backing behind Senate Bill 481 (NC PACES) due to its support for balanced, commonsense crowdfunding models for North Carolina investors and businesses. As this new measure ensures revenue from public utilities taxes paid by job creators is used properly by municipalities – thus reducing potential costs to employers from double-taxation – the NC Chamber is continuing to put strong support behind this important piece of legislation.

Instead of being subject to license, franchise or privilege taxes, public utilities in North Carolina (including providers of piped natural gas, telecommunications, electricity and video services) are subject to a combined state and local gross receipts tax of 7 percent on services provided. The Department of Revenue distributes more than 70 percent of this combined general sales tax revenue to municipalities on a quarterly basis, with an approximate annual distribution of $400 million. This revenue is primarily intended to cover local government costs associated with the administration of public utility infrastructure, including managing and permitting for work in rights-of-way (ROW) – corridors of land reserved for public infrastructure development.

Unfortunately, a small but growing number of municipalities are pocketing the gross receipts revenues and then imposing additional, ever-increasing fees on utilities for access to rights-of-way. These additional fees are bad for business in North Carolina. They deter investment in critical infrastructure and are ultimately paid for by other job creators and individual consumers in the form of a higher tax on energy use. The latest version of Senate Bill 481 removes this threat to fair taxation on job creators and consumers by requiring that all municipalities must use the combined state and local gross receipts tax revenue as intended rather than allocating the funds for other purposes and then assessing new fees to double-recover the same revenues.

The N.C. House voted unanimously in favor of this strong pro-business bill on second reading yesterday, and is expected to take up the bill for a third reading vote next Monday, June 27. The NC Chamber applauds House members’ decisive action with their recent vote and we are confident that elected leaders will continue to show the same decisive action to quickly secure this bill as law.

Gary J. Salamido
Vice President, Government Affairs
North Carolina Chamber