2018 Excise Tax Law Changes

Session Law 2017-151 previously amended General Statute 105-41(a)(2) to add language in the statute extending the requirement for a privilege license to massage and bodywork therapists. However, due to a technical issue, that amendment required re-enactment. The re-enacted provision is effective when it becomes law and continues to apply the new privilege license to taxable years beginning on or after July 1, 2018.

(Effective June 12, 2018; SB 99, s. 38.2(h), S.L. 2018-5)

This is a new statute that defines a “modified risk tobacco product,” as a product that is sold or distributed for use to reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products. The new statute provides an excise tax rate reduction based on whether the Food and Drug Administration (FDA) issues a risk modification order (50% tax rate reduction) or an exposure modification order (25% tax rate reduction) for a tobacco product. The new provision also sets out how a tobacco product licensee must substantiate a modified risk tobacco product to the Department to obtain the reduced tax rate and provisions for when a product no longer qualifies as a modified risk tobacco product.

(Effective June 12, 2018; SB 99, s. 38.7(a), S.L. 2018-5)

Subsection (2) of this statute is rewritten to clarify that interstate business as used in this section involves purchasers of tobacco products and removes language indicating that a nonresident wholesale or retail dealer with no place of business within the state must be registered with the Secretary.

(Effective June 12, 2018; SB 99, s. 38.6(a), S.L. 2018-5)

This statute is rewritten to remove language indicating that a licensed retail dealer may “make” tobacco products at their place of business, as making or manufacturing any tobacco product falls within the definition of a wholesale dealer and therefore requires a wholesale dealer license for that type of activity.

(Effective June 12, 2018; SB 99, s. 38.6(b), S.L. 2018-5)

This is a new statute that requires certain ABC permit holders, as listed in the new statute, to register with the Department for excise tax purposes, as well as to require these same permittees to notify the Department when a permittee discontinues their business. Additionally, Chapter 18B penalties are available for failing to comply with the requirements of this provision upon the Department notifying the ABC Commission of the violation. The provisions of this statute are effective July 1, 2018 and permittees must register with the Department on or before December 1, 2018.

(Effective July 1, 2018; SB 99, s. 38.6(c), S.L. 2018-5)

Subsection (b) of this statute is rewritten to remove language indicating that nonresident vendors may post a bond secured “by a pledge of obligation of the federal government, the state, or a political subdivision of the state.”

(Effective June 12, 2018; SB 99, s. 38.6(d), S.L. 2018-5)

Subsection (a) of this statute is rewritten to add language allowing the Department to obtain the Consumer Price Index data needed to calculate the motor fuel tax rate by using “data determined by the Secretary to be equivalent” in lieu of the specific Bureau of Labor Statistics detailed report referenced in the statute. The Bureau of Labor Statistics stopped publication of the detailed report in June 2017, and instead releases the same information through a public access database available on the Bureau’s website. The new language allows the Department to use the database information as an equivalent source.

(Effective June 12, 2018; SB 99, s. 38.6(f), S.L. 2018-5)

This statute is amended by adding a new exempt entity from the motor fuels excise tax. The new subsection reads as follows:

“(11) Motor fuel sold to a joint agency created by interlocal agreement pursuant to G.S. 160A-462 to provide fire protection, emergency services, or police protection.”

(Effective October 1, 2018; SB 220, s. 1, S.L. 2018-39)

Section 2(b) of Session Law 2016-23 set the motor fuel tax rate for gas stations deemed a “special class” as part of the North Carolina / South Carolina boundary recertification. Per S.L. 2016-23, an establishment to which permits may be issued under G.S. § 18B-1006(n1) is considered a special class of property under the North Carolina Constitution, and the excise tax rate for motor fuel sold by the establishment was set at 16 cents per gallon, which was the rate charged by South Carolina at the time of enactment. The Revenue Laws Study Committee monitors South Carolina’s motor fuels excise tax rate and determined that in 2017, the South Carolina Legislature passed House Bill 3516, which permanently increased the motor fuel tax rate by two cents per gallon each year for the next six years. The following chart sets out the applicable motor fuels per gallon, excise tax rate for the special class properties:

(Effective as indicated in table above; SB 99, ss. 38.6(g), 38.6(h), 38.6(i), 38.6(j), 38.6(k) and 38.6(l), S.L. 2018-5)