AGENDA #6e
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Ordinance Levying Gross Receipts Tax on Rental Cars Effective July 1, 2000
DATE: June 26, 2000
The attached ordinance would allow to Town to enact a gross receipts tax on all car rentals in Chapel Hill and would replace revenue from the existing property taxes on rental vehicles, which is being eliminated. This new law was enacted by the General Assembly on May 17, and is effective beginning July l, 2000. The maximum tax for such rentals would be one and one-half percent of the short-term lease or rental of vehicles to the general public.
Senate Bill 1076 entitled “An Act to Repeal the Property Tax on Certain Vehicles Leased or Rented Under Retail Short-Term Leases or Rentals and to Replace the Tax Revenue with a Local Tax on Gross Receipts Derived from Retail Short-Term Leases or Rentals” (the “Act”) was signed into law on May 17 and has been designated as Session Law 2000-2. A copy of the new law is enclosed with the memorandum.
Prior to the enactment of this legislation, municipalities have had the authority to levy ad valorem property taxes on vehicles offered at retail for short-term (generally for periods of less than 365 days) lease or rental. The Act repeals that authority, now designating such vehicles as property classified and excluded from the tax base. See, GS § 205-275. The legislation does, however, provided a mechanism to replace the ad valorem property tax previously levied on these vehicles.
The Act amends G.S. Chapter 160A by adding a new section, 160A-215.1, entitled “Gross receipts tax on short-term leases or rentals.” This section authorizes a municipality to levy a gross receipts tax on the gross receipts from the short-term lease or rental of vehicles at retail to the general public. Under the terms of the statute, the tax rate may not exceed one and one-half percent. This gross receipts tax is in addition to the privilege taxes authorized by G.S. § 160A-211 and any other gross receipts tax that may be applicable in your municipality.
We recommend adoption of the attached ordinance which is a model ordinance proposed by the N. C. League of Municipalities for cities and towns. Enacting this ordinance is the only effective way to recapture the revenue loss from the elimination of property taxes on rental vehicles.
The Town would be required to collect this tax from all car rental or lease businesses in Chapel Hill. There appears to be only about five businesses in Chapel Hill engaged in car rentals at the current time and we anticipate minimal administrative time would be involved in collecting the tax.
We have not yet had adequate time to collect information on revenue that would be collected from this tax, but based on preliminary information provided by the Orange County tax collector responsible for collecting property taxes on these vehicles under the current law, we believe the revenue from leases or rental in Chapel Hill would be about the same as the property tax now being collected.
We will provide additional information to the Council on this new revenue as more information is available from Orange County tax records and from rental car businesses.
That the Council adopt the attached ordinance enacting a gross receipts tax to replace property taxes on rental vehicles in Chapel Hill.
AN ORDINANCE LEVYING A TAX ON GROSS RECEIPTS DERIVED FROM RETAIL SHORT-TERM LEASE OR RENTAL OF VEHICLESi (2000-06-26/O-8)
WHEREAS, the North Carolina General Assembly has ratified Senate Bill 1076, which has been designated as Session Law 2000-2 [the “Act”] and made effective for taxable years beginning on or after July 1, 2000; and,
WHEREAS, the Act repealed the property tax on certain vehicles leased or rented under retail short-term leases or rentals and authorized municipalities to replace the lost tax revenue through enactment of a local tax on gross receipts derived from retail short-term leases or rentals.
NOW, THEREFORE, BE IT ORDAINED by the Council of the Town of Chapel Hill, North Carolina that:
Section 1. Definitions. In addition to the common meanings of words, the following definitions shall be applicable herein:
(a) “Customer” shall mean any person that leases or rents a vehicle on a short-term lease or rental basis.
(b) “General Statutes” shall refer to the North Carolina General Statutes and any reference to a particular section thereof shall include the same as may be from time to time amended, modified, supplemented, revised or superseded.
(c) “Gross receipts” shall mean the amount that is or would be reported as gross receipts on a business’s State income tax return, or on the federal income tax return filed with the state income tax return if the state return does not separately state gross receipts for the most recently completed tax year. Taxes collected hereunder are not subject to the tax herein imposed and are not included in gross receipts.
(d) “Lease or rental” shall mean a transfer, for consideration, of the use but not the ownership of property to another for a period of time. [G.S. § 105-164.3(7a)]
(e) “Long-term lease or rental” shall mean a lease or rental made under a written agreement to lease or rent property to the same person for a period of at least three hundred sixty-five (365) continuous days. [G.S. § 105-187.1(3)]
(f) “Person” shall mean any individual, trustee, executor, other fiduciary, corporation, unincorporated association, partnership, sole proprietorship, company, firm, or other legal entity.
(g) “Short-term lease or rental” shall mean any lease or rental of a vehicle that is not a long-term lease or rental. [G.S. § 160A-215.1(e)(2) and G.S. § 105-187.1(4)]
(h) “Tax Collector” shall refer to that individual appointed by the governing body pursuant to (G.S. § 105-349)(the provisions of the municipal charter), to collect taxes on behalf of the (City)(Town)(Village) and any other person authorized to carry out the duties and functions of such individual.
(i) “Taxpayer” means any person liable for the taxes imposed by this Ordinance.
(j) “Vehicle” shall mean any of the following:
(i) a motor vehicle of the private passenger type, including a passenger van, minivan, or sport utility vehicle.
(ii) a motor vehicle of the cargo type, including a cargo van, pickup truck, or truck with a gross vehicle weight of 26,000 pounds or less used predominantly in the transportation of property for other than commercial freight, and that does not require the operator to possess a commercial drivers license.
(iii) a trailer or semitrailer with a gross vehicle weight of 6,000 pounds or less. [G.S. 160A-215.1(e)(1)]
Section 2. Levy of Tax. A tax is hereby imposed and levied in an amount equal to one and one-half percent (1.5%)[i] of the gross receipts derived from the short-term lease or rental of vehicles at retail to the general public. This tax on gross receipts is in addition to the privilege taxes authorized by G.S. § 160A-211.
Section 3. Collection of the Tax. Every person engaged in the business of the short-term lease or rental of vehicles at retail to the general public shall collect at the time of the lease or rental the tax herein levied, place the tax so collected in a segregated account, and thereafter remit such tax to the Tax Collector in accordance with the provisions of this Ordinance. The taxpayer shall include a provision in each retail short-term lease or rental agreement stating that the percentage amount enacted by this Ordinance of the total lease or rental price, excluding sales tax, is being charged as a tax on gross receipts. The amount of the tax shall be stated separately from the lease or rental and shown separately on the taxpayer’s records. The tax shall be paid by the customer to the taxpayer as trustee for and on account of the (City)(Town)(Village). The taxpayer shall be liable for the collection thereof and for its payment to the Tax Collector and the taxpayer’s failure to charge or to collect said tax from the customer shall not affect such liability.
Section 4. Report and Payment of Tax. Taxes levied under this Ordinance are due and payable when a return is required to be filed. Every taxpayer shall, within the time specified, submit a return to the Tax Collector on the form prescribed by the Tax Collector. A return must be signed by the taxpayer or the taxpayer’s agent. Returns of taxpayers are due to the Tax Collector each month on or before the fifteenth (15th) day of the month following the month in which the tax accrues. As provided in G.S. § 160A-208.1, a return shall not be considered a public record and information contained in a return may be disclosed only in accordance therewith.
Section 5. Taxpayer to Keep Records. The taxpayer shall keep and preserve suitable records of the gross receipts received by such taxpayer in the conduct of business and such other books or accounts as may be necessary to determine the amount of the tax for which such taxpayer is liable under the provisions of this Ordinance. It shall be the duty of the taxpayer to keep and preserve for a period of three years all such records of gross receipts and other books and accounts described. All records, books and accounts herein described shall be open for examination at all reasonable hours during the day by the Tax Collector or his duly authorized agent.
Section 6. Tax Collector to Provide Forms. The Tax Collector shall design, prepare, print and make available to all taxpayers operating within the municipal boundaries of the (City)(Town)(Village) forms and instructions for filing returns to insure a full collection of and an accounting for taxes due. The failure of any taxpayer to obtain or receive forms shall not relieve such taxpayer from the payment of the tax at the time and in the manner provided.
Section 7. Situs. The transaction giving rise to the tax herein levied shall be deemed to have occurred at the location of the entity from which the customer takes delivery of the vehicle. [G.S. § 160A-215.1(b)]
Section 8. Penalties and Remedies. The provisions with respect to remedies and penalties applicable to Subchapter VIII (Local Government Sales and Use Tax) of Chapter 105 of the General Statutes, as contained in Article 5 and Article 9, Subchapter 1, Chapter 105 thereof, shall be applicable in like manner to the tax authorized to be levied and collected under this Ordinance, to the extent that the same are not inconsistent with the provisions hereof. The governing body of the (City)(Town)(Village) may exercise any power the Secretary of Revenue may exercise in collecting sales and use taxes. [G.S. § 160A-215.1(f)]
Section 9. Administration. In addition to the provisions herein, the levy and collection of the taxes herein imposed shall be otherwise administered in the same manner as the Sales and Use Tax as provided in Article 5, Subchapter 1, Chapter 105 of the General Statutes. [G.S. § 160A-215.1(d)]
Section 10. Severability. If any section, clause, or provision of this Ordinance shall be found to be invalid, the validity of the remaining sections, clauses or provisions shall not be affected thereby.
Section 11. Authority. This Ordinance is enacted pursuant to the provisions of G.S. § 160A-215.1.
Section 12. Effective Date. This Ordinance and the taxes thereby levied and imposed shall become effective July 1, 2000.
This the 26th day of June, 2000.
______________________________
Rosemary I. Waldorf, Mayor
ATTEST:
________________________________
Joyce A. Smith, Town Clerk
Approved as to Form:
________________________________
Ralph D. Karpinos, Town Attorney
[i] The Act provides that the gross receipts tax levied by a municipality may not exceed one and one-half percent (1.5%).