North Carolina § 105-187 - 5. Alternate tax for a limited possession commitment.

§ 105-187. 5. Alternate tax for a limited possession commitment.

Election. - A retailer may elect not to pay the tax imposed by this Article at the rate set in G.S. 105-187.3 when applying for a certificate of title for a motor vehicle purchased by the retailer for a limited possession commitment. A retailer who makes this election shall pay a tax on the gross receipts of the limited possession commitment of the vehicle. The portion of a limited possession commitment billing or payment that represents any amount applicable to the sales price of a service contract as defined in G.S. 105-164.3 should not be included in the gross receipts subject to the tax imposed by this Article. The charge must be separately stated on documentation given to the purchaser at the time the limited possession commitment goes into effect, or on the monthly billing statement or other documentation given to the purchaser. When a limited possession commitment is sold to another retailer, the seller of the limited possession commitment should provide to the purchaser of the limited possession commitment the documentation showing that the service contract and applicable sales taxes were separately stated at the time the limited possession commitment went into effect and the new retailer must retain the information to support an allocation for tax computed on the gross receipts subject to highway use tax. Like the tax imposed by G.S. 105-187.3, this alternate tax is a tax on the privilege of using the highways of this State. The tax is imposed on a retailer, but is to be added to the limited possession commitment of a motor vehicle and thereby be paid by the person who enters into a limited possession commitment with a retailer. Rate. - The applicable tax rates on the gross receipts from a limited possession commitment are as listed in this subsection. Gross receipts does not include the amount of any allowance given for a motor vehicle taken in trade as a partial payment on the limited possession commitment. The maximum tax in G.S. 105-187.3(a1) on certain motor vehicles applies to a continuous limited possession commitment of such a motor vehicle to the same person. The applicable tax rates are as follows: Method. - A retailer who elects to pay tax on the gross receipts of the limited possession commitment of a motor vehicle shall make this election when applying for a certificate of title for the vehicle. To make the election, the retailer shall complete a form provided by the Division giving information needed to collect the alternate tax based on gross receipts. Once made, an election is irrevocable. Administration. - The Division shall notify the Secretary of Revenue of a retailer who makes the election under this section. A retailer who makes this election shall report and remit to the Secretary the tax on the gross receipts of the limited possession commitment of the motor vehicle. The Secretary shall administer the tax imposed by this section on gross receipts in the same manner as the tax levied under G.S. 105-164.4(a)(2). The administrative provisions and powers of the Secretary that apply to the tax levied under G.S. 105-164.4(a)(2) apply to the tax imposed by this section. In addition, the Division may request the Secretary to audit a retailer who elects to pay tax on gross receipts under this section. When the Secretary conducts an audit at the request of the Division, the Division shall reimburse the Secretary for the cost of the audit, as determined by the Secretary. In conducting an audit of a retailer under this section, the Secretary may audit any sales of motor vehicles made by the retailer. Type of Limited Possession Commitment Tax Rate Short-term lease or rental 8% Vehicle subscription 5% Long-term lease or rental 3% History (1989, c. 692, s. 4.1; 1991, c. 79, s. 5; c. 193, s. 3; 1995, c. 410, s. 1; 2000-173, s. 10(b); 2001-424, s. 34.24(b); 2001-497, s. 2(c); 2014-3, s. 6.1(h); 2015-259, s. 5(e); 2016-92, s. 2.7; 2016-94, s. 38.5(k); 2019-69, s. 2.) Editor's Note. - Session Laws 2015-259, s. 5(f), provides: "This section becomes effective March 1, 2016, and applies to service contracts purchased on or after date, if House Bill 97 of the 2015 Regular Session of the General Assembly is enacted." House Bill 97 was enacted as Session Laws 2015-241. Session Laws 2016-94, s. 38.5(a), provides: "A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016." Session Laws 2015-94, s. 38.5( l ), provides: "The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016." Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(k), applicable to sales made on or after January 1, 2017. Session Laws 2016-94, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2016.'" Session Laws 2016-94, s. 39.4, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year." Session Laws 2016-94, s. 39.7, is a severability clause. Session Laws 2019-69, s. 6, made the amendment to this section by Session Laws 2019-69, s. 2, effective October 1, 2019, and applicable to vehicle subscription agreements entered into on or after that date. Effect of Amendments. - Session Laws 2014-3, s. 6.1(h), effective October 1, 2014, inserted the third and fourth sentences in subsection (a). See Editor's note for applicability. Session Laws 2015-259, s. 5(e), rewrote subsection (a). For effective date and applicability, see Editor's note. Session Laws 2016-92, s. 2.7, effective July 11, 2016, substituted "G.S. 105-187.3(a1)" for "G.S. 105-187.3(a)" in the last sentence of subsection (b). Session Laws 2016-94, s. 38.5(k), effective January 1, 2017, in subsection (a), substituted "charge must" for "charge should" in the fourth sentence, deleted the former fifth sentence, which read: "Where a retailer fails to separately state any portion of a lease or rental billing or payment that represents an amount applicable to the sale price of a service contract, the amount is deemed to be part of the gross receipts of a lease or rental of a vehicle," and added the present fifth sentence; and substituted "G.S. 105-187.3(a1)" for "G.S. 105-187.3(a)" in the last sentence of subsection (b). See editor's note for applicability. Session Laws 2019-69, s. 2, rewrote the section heading, which formerly read "Alternate tax for those who rent or lease motor vehicles"; substituted "limited possession commitment" for "lease or rental" throughout the section;substituted "enters into a limited possession commitment with a retailer" for "leases or rents the vehicle" in the last sentence of subsection (a); and, in subsection (b), rewrote the first sentence and added the last sentence. For effective date and applicablity, see editor's note.