DOBSON — Surry County Manager Chris Knopf said he’s “OK” with an altered Senate bill that would change the state sales tax structure. Likewise, Dobson Town Manager Josh Smith told Dobson Commissioners that the legislation no longer threatened the town’s local sales tax.
Following the introduction of Senate Bill 369, which was co-sponsored by State Sen. Shirley Randleman, the Surry County, Mount Airy and Dobson Boards of Commissioners all passed resolutions against the “Sales Tax Fairness Act.”
Proponents of the legislation, such as Senate Majority Leader Harry Brown, said the bill would close a financial gap between rural counties and metropolitan counties with more businesses. Among other things, the bill would have shifted disbursement of state levied sales taxes from a point of sale distribution method to a per capita system based on population.
The thought behind the change in disbursement method was that many residents in rural counties do their shopping in larger metropolitan counties. Under the system that is currently in place the majority of sales tax revenues are returned to the counties in which sales are made.
Obvious concerns were raised from members of the General Assembly representing counties such as Guilford and Mecklenburg. However, verbiage in the legislation that would have converted county and municipality-levied sales taxes into a state sales tax caused local officials to line-up against the change.
According to Knopf and Smith the current legislation, which is a House bill that the Senate is expected to adopt, no longer threatens to rob the county and its municipalities of their taxing authority. Assistant County Manager Betty Taylor has stated that sales tax accounts for more than 20 percent of Surry County’s revenue.
The North Carolina Association of County Commissioners has released an analysis of the new sales tax legislation. That organization is saying that the bill, in its current form, will make changes without touching county and municipality-levied sales tax.
However, if passed the legislation will change the disbursement of state-levied sales taxes from a formula that is based 25 percent on point of sale and 75 percent on per capita to a system based 80 percent on point of sale and 20 percent on per capita. The plan is to be phased-in throughout the next five years.
The bill would also change the way Job Development Investment Grant (JDIG) money is appropriated. According to the association and County Commissioner Larry Phillips the change will help rural counties garner more of the grant money.
Another change, and one Knopf isn’t as happy about, is an expansion of the sales tax base. If passed, the new legislation would levy sales tax on services such as veterinarian visits, repair and maintenance services and advertising services. The legislation would also phase down the amount of sales for which a non-profit institution can receive a refund.
Additionally, the legislation allows counties to levy an additional one quarter or one half cent sales tax. That tax would have to be initiated and approved as a referendum.
Overall, Knopf said the legislation, per the Association of County Commissioners’ analysis, would have very little effect on the county’s budget. Knopf said Surry County would remain about revenue-neutral if the bill is passed, adding that the small increase in revenue reflected may simply be the result of the expansion of the sales tax base.