2020 Excise Tax Law Changes

This subsection was amended by clarifying that the definition of sale under Article 2A includes both the transfer of possession of tobacco products and the transfer of ownership of tobacco products. Therefore, as amended, sale means “[a] transfer of possession, transfer of ownership, a trade, an exchange, or a barter, in any manner or by any means, with or without consideration.”

(Effective June 30, 2020; HB 1080, s. 2.1, S.L. 2020-58)

This subsection was amended requiring licensees to conspicuously display each license issued under Article 2A.

(Effective June 30, 2020; HB 1080, s. 2.2.(a), S.L. 2020-58)

This subsection was amended allowing the Secretary to “make available” certain information requested by licensed manufacturers. This amendment allows the Secretary flexibility in how to disclose information maintained by the Department.

(Effective June 30, 2020; HB 1080, s. 2.2.(a), S.L. 2020-58)

This subsection was amended to clarify the process for cancelling a license under Article 2A. If a licensee desires to cancel the license, the licensee must: (1) provide a written request to the Secretary to cancel the license, including a proposed effective date of cancellation; and (2) return the license to the Secretary before the effective date of cancellation.

If the licensee does not include a proposed effective date of cancellation, the Secretary will cancel the license 15 days after the Department receives the written request. If the licensee is unable to return the license, the licensee must include written statement explaining why the license cannot be returned. If the reasons are satisfactory to the Secretary, the Secretary will cancel the license and notify the person whose licensed was cancelled.

(Effective June 30, 2020; HB 1080, s. 2.3.(a), S.L. 2020-58)

The statutory language providing for how licensees can cancel their license and the language setting forth Secretary’s authority to revoke a license were previously combined in subsection (a). To make the statute more clear, the language governing the Secretary’s authority to revoke a license was moved from subsection (a) into the newly created subsection: (a1). The catchlines were updated to reflect this change.

(Effective June 30, 2020; HB 1080, s. 2.3.(a), S.L. 2020-58)

This subsection was amended to clarify that when a licensee fails to attend a hearing where the license has not been summarily revoked, the license revocation is effective 15 days after the noticed hearing.

(Effective June 30, 2020; HB 1080, s. 2.3.(a), S.L. 2020-58)

This subsection was amended to place the responsibility on the manufacturer to substantiate that a product qualifies as a modified risk tobacco product and is subject to a reduced tax rate in accordance with G.S. 105-113.4E.

(Effective June 30, 2020; HB 1080, s. 2.4., S.L. 2020-58)

This subsection was created from an indebted paragraph in G.S. 105-113.4E(c). It separates the provisions on how to substantiate that a tobacco product qualifies as a modified risk tobacco product from the provisions requiring certain actions when a tobacco product no longer qualifies as a modified risk tobacco product.

As amended, this subsection now requires the manufacturer to notify the Department of changes to any tobacco product previously substantiated under G.S. 105-113.4E(c) as a modified risk tobacco product. Specifically, if the order from the United States Food and Drug Administration (“FDA”) expires, or the FDA does not renew the order or withdraws the order, the manufacturer must notify the Department within 14 days of the manufacturer’s receipt from the FDA.

(Effective June 30, 2020; HB 1080, s. 2.4., S.L. 2020-58)

This section was created to consolidate two nearly identical statutes within Article 2A requiring persons to maintain records for activities requiring licensure. Accordingly, G.S. 105-113.26 and G.S. 105-113.40 were repealed. This was not a substantive change and was intended to reduce unnecessary, repetitive statutory language and to have one statute govern record keeping requirements for all licensees under Article 2A.

(Effective June 30, 2020; HB 1080, s. 2.5.(a)-(b), S.L. 2020-58)

This subsection was amended to clarify that the Department may require a bond or an irrevocable letter of credit from all distributors regardless of whether a distributor has previously failed to pay taxes due.

(Effective June 30, 2020; HB 1080, s. 2.6.(a), S.L. 2020-58)

This subsection was amended to clarify that, if done in accordance with Article 2A, a person may sell or offer to sell non-tax-paid cigarettes.

(Effective June 30, 2020; HB 1080, s. 2.7., S.L. 2020-58)

This section was amended to clarify that the Department may require a bond or an irrevocable letter of credit from all wholesale dealers and retail dealers regardless of whether a wholesale dealer or retail dealer has previously failed to pay taxes due.

(Effective June 30, 2020; HB 1080, s. 2.6.(b), S.L. 2020-58)

The definition of “Commission” was updated to reflect previous statutory changes under Part 6A of Chapter 143B. The term “North Carolina Mining and Energy Commission” was replaced with “North Carolina Oil and Gas Commission.”

(Effective June 30, 2020; HB 1080, s. 2.8.(a), S.L. 2020-58)

The term “Mining and Energy” was stricken. The subsection now refers to the updated definition of Commission.

(Effective June 30, 2020; HB 1080, s. 2.8.(b), S.L. 2020-58)

The term “Mining and Energy” was stricken. The subsection now refers to the updated definition of Commission.

(Effective June 30, 2020; HB 1080, s. 2.8.(c), S.L. 2020-58)

This subdivision was amended to incorporate the most recent agreement adopted by the International Fuel Tax Association, Inc.: the International Fuel Tax Agreement as of December 1, 2018.

(Effective June 30, 2020; HB 1080, s. 2.9., S.L. 2020-58)

This subsection was amended to clarify that if a motor carrier is operating under a temporary permit in accordance with G.S. 105-449.49, a motor carrier is not required to display decals on the motor vehicle.

(Effective June 30, 2020; HB 1080, s. 2.10.(a), S.L. 2020-58)

This subsection was amended to update the catchline. “Issuance” was replaced with “Permitting Service” to clarify the role of a permitting service. A permitting service may obtain temporary permits from the Secretary for a fee. These permits can be subsequently issued to motor carriers allowing motor carriers to operate for three days without licensing the motor vehicle in accordance with G.S. 105-449.47.

(Effective June 30, 2020; HB 1080, s. 2.10.(b), S.L. 2020-58)

This subsection was added allowing a licensed motor carrier, subject to the International Fuel Tax Agreement, to obtain a temporary permit to operate a qualified motor vehicle in the state for 30 days without a decal.

(Effective June 30, 2020; HB 1080, s. 2.10.(b), S.L. 2020-58)

This subsection was added clarifying that a motor carrier is required to carry a temporary permit, authorized under this section, in the motor vehicle. A motor carrier may be subject to penalties under G.S. 105-449.52 for failure to carry a temporary permit.

(Effective June 30, 2020; HB 1080, s. 2.10.(b), S.L. 2020-58)

This subsection was amended to clarify the process for cancelling a license under Article 36C. If a licensee desires to cancel the license, the licensee must: (1) provide a written request to the Secretary to cancel the license, including a proposed effective date of cancellation; and (2) return the license to the Secretary before the effective date of cancellation.

If the licensee does not include a proposed effective date of cancellation, the Secretary will cancel the license 15 days after the Department receives the written request. If the licensee is unable to return the license, the licensee must include written statement explaining why the license cannot be returned. If the reasons are satisfactory to the Secretary, the Secretary will cancel the license and notify the person whose licensed was cancelled.

(Effective June 30, 2020; HB 1080, s. 2.3.(b), S.L. 2020-58)

The statutory language providing for how licensees can cancel their license and the language setting forth Secretary’s authority to revoke a license were previously combined in subsection (a). To make the statute more clear, the language governing the Secretary’s authority to revoke a license was moved from subsection (a) into the newly created subsection: (a1). The catchlines were updated to reflect this change.

(Effective June 30, 2020; HB 1080, s. 2.3.(b), S.L. 2020-58)

This subsection was amended to clarify that when a licensee fails to attend a hearing where the license has not been summarily revoked, the license revocation is effective 15 days after the noticed hearing.

(Effective June 30, 2020; HB 1080, s. 2.3.(b), S.L. 2020-58)

This section was added during a previous legislative session allowing the Department to issue a temporary license to import, export, distribute, or transport motor fuel in this state in response to a disaster declaration.

Subsections (a) and (b) were amended expanding the authority for the Department to issue a temporary license in response to a state of emergency as defined in Chapter 166A. These sections were also amended to restructure how the statute operates, providing additional certainty regarding the effective periods of licensure and expanding the time period for which a person can begin to operate in response to a state of emergency or disaster declaration.

As amended, the person seeking a temporary license must submit an application within seven calendar days of engaging in business in this state. The “temporary license is effective on the date the applicant engages in business in this state and expires 30 days after that date. Prior to the expiration of the temporary license, the licensee may request the license be extended for an additional 30 days, if the state of emergency or disaster declaration remains in effect.”

The license will not be renewed or a new temporary license granted if the licensee failed to comply with Article 36C.

(Effective June 30, 2020; HB 1080, s. 2.11., S.L. 2020-58)

This subsection was amended to allow the Secretary flexibility in how to disclose licensee information maintained by the Department. Specifically, the Secretary need only make licensee information available to other persons licensed under Article 36C.

(Effective June 30, 2020; HB 1080, s. 2.2.(c), S.L. 2020-58)

These subdivisions were amended changing excise tax revenue distributions from revenue collected under Article 36C. The allocations between the highway fund and the highway trust fund were modified as follows:

• For excise tax revenue collected by the Department on or after July 1, 2020: Eightyone percent (81%) to the Highway Fund; Nineteen percent (19%) to the Highway Trust Fund. 
• For excise tax revenue collected by the Department on or after July 1, 2021: Eighty percent (80%) to the Highway Fund; Twenty percent (20%) to the Highway Trust Fund. 
• For excise tax revenue collected by the Department on or after July 1, 2022: Seventy-five percent (75%) to the Highway Fund; Twenty-five percent (25%) to the Highway Trust Fund.

(Effective July 1, 2020, July 1, 2021, July 1, 2022; HB 77, s. 4.6., S.L. 2020-91)

Pursuant to Session Law 2020-91, the motor fuel excise tax rate calculated by G.S. 105-449.80(a) was modified for the 2021 and 2022 calendar years.

For the period beginning January 1, 2021, and ending on December 31, 2021, the motor fuel excise tax rate “shall be the greater of thirty-six and one-tenth cents (36.1¢) per gallon or the rate calculated pursuant to G.S. 105-449.80(a).”

For the period beginning January 1, 2022, and ending on December 31, 2022, the Session Law modifies one variable used in calculating the motor fuel excise tax rate: the preceding year’s excise tax rate. Generally, the motor fuel excise tax rate is calculated by using the tax rate from the preceding calendar year, multiplied by a percentage of various factors. However, this is modified for the period beginning January 1, 2022 where the:

motor fuel tax rate shall be calculated pursuant to the formula set out in G.S. 105- 449.80(a) using as the amount for the preceding calendar year the amount that the motor fuel tax rate would have been for the period beginning on January 1, 2021, and ending on December 31, 2021, but for the calculation under this section [Section 4.2 of Session Law 2020-91].

(Effective July 1, 2020; HB 77, s. 4.2., S.L. 2020-91)

This section was amended to clarify that the cancellation procedures provided for in Article 36C also apply to licensees seeking to cancel a license issued under Article 36D.

(Effective June 30, 2020; HB 1080, s. 2.12., S.L. 2020-58)

This subsection was amended to allow the Secretary flexibility in how to disclose licensee information maintained by the Department. Specifically, the Secretary need only make available, annually: (1) licensed alternative fuel provider information to licensed bulk end-users and licensed retailers; and (2) licensed bulk end-user and licensed retailer information to licensed alternative fuel providers.

(Effective June 30, 2020; HB 1080, s. 2.2.(d), S.L. 2020-58)

This subsection was amended to mirror the revocation procedures in Article 36C of Chapter 105. As amended, the Secretary must send notices for summary license revocations and notices of hearing using “certified mail” instead of “registered mail.”

(Effective June 30, 2020; HB 1080, s. 2.13, S.L. 2020-58)

Session Law 2020- 58 removed the North Carolina Department of Revenue as a state agency licensing board as defined under G.S. 93B-1(3).

(Effective June 30, 2020; HB 1080, s. 6.5, S.L. 2020-58)

This subdivision was amended to allow the Secretary flexibility in how to disclose licensee information maintained by the Department and to clarify who can obtain taxpayer information. Specifically, the Secretary need only make licensee information available to other persons licensed under Article 2A.

(Effective June 30, 2020; HB 1080, s. 2.2.(b), S.L. 2020-58)