2019 Excise Tax Law Changes

This section was amended by adding the following four definitions to implement the collection of taxes on tobacco products sold through indirect means or where the consumer of the tobacco product is not in the physical presence of the seller:

(1n) Consumer. – An individual who purchases, receives, or possesses tobacco products for personal consumption and not for resale.
…
(2d) Delivery sale. – A sale of tobacco products to a consumer in this state in which either of the following apply: 
a. The consumer submits the order for the sale by telephone, mail, the Internet or other online service or application, or when the seller is otherwise not in the physical presence of the consumer when the consumer submits the order. 
b. The tobacco products are delivered via mail or a delivery service.
(2e) Delivery seller. – A person that makes a delivery sale. 
(2f) Delivery service. – A person engaged in the commercial delivery of letters, packages, or other containers.

(Effective October 1, 2019; SB 523, s. 4.7.(a), S.L. 2019-169)

Session Law 2019-169 provided that all licenses under Article 2A of Chapter 105, issued on or before January 1, 2020, expire on June 30, 2020.

Licensees who are still engaged in business that require a license under Article 2A must renew the license by filing an application with the Secretary, in accordance with G.S. 105-113.4A, before June 30, 2020. The Department of Revenue will notify all licensees about the expiration of these licenses.

(Effective July 26, 2019; SB 523, s. 4.2.(e), S.L. 2019-169)

Subsections (a) and (c) were amended allowing a licensee to “renew” a license or the Secretary to refuse to “renew” a license. This language was added to provide consistent language for renewable licenses under G.S. 105-113.12 and G.S. 105-113.36 as amended by S.L. 2019-169, § 4.2(c)-(d).

(Effective January 01, 2020; SB 523, s. 4.2.(a), S.L. 2019-169)

This subdivision was amended to allow the Secretary to refuse to issue or renew a license if a licensee fails to meet the requirements set out in G.S. 105-113.4A(b).

(Effective January 01, 2020; SB 523, s. 4.2.(a), S.L. 2019-169)

This subsection was amended by replacing “surrender” with “cancel.” This synchronizes the word choice between G.S. 105-113.4A and G.S. 105-113.4B where G.S. 105-113.4B provides that a license can be cancelled by the licensee or revoked by the Secretary.

(Effective July 26, 2019; SB 523, s. 4.1.(a), S.L. 2019-169)

This subsection was amended modifying what licensee information is available to licensed manufacturers. As amended, the information is limited to records maintained by the Secretary under G.S. 105- 113.4A(g)(3). This subdivision requires that, upon request by a licensed manufacturer, the Secretary provide the licensed manufacturer a list of “[p]ersons that hold a current license issued under this Article, by license category.”

(Effective July 26, 2019; SB 523, s. 4.1.(a), S.L. 2019-169)

This subsection was amended requiring that a licensee requesting cancellation of the license must immediately return the license to the Secretary. Only a written request by the licensee was previously required.

(Effective July 26, 2019; SB 523, s. 4.1.(b), S.L. 2019-169)

This subdivision was amended to allow the Secretary to revoke a license if a licensee fails to meet or maintain the requirements set out in G.S. 105-113.4A(b).

(Effective January 01, 2020; SB 523, s. 4.2.(b), S.L. 2019-169)

This subsection was amended by changing the method of sending certain documents for license revocations. As amended, the Secretary must send notices for summary license revocations and notices of hearing using “certified mail” instead of “registered mail”.

(Effective July 26, 2019; SB 523, s. 4.1.(b), S.L. 2019-169)

In conjunction with the new definitions in G.S. 105-113.4, this new section was added requiring a delivery seller, regardless of where the delivery seller is located, to:

1. Obtain a license from the Secretary pursuant to the requirements of Article 2A before accepting an order; 
2. Comply with the age verification requirements in G.S. 14-313(b2); and 
3. Report, collect, and remit to the Secretary all taxes levied on tobacco products as set out in Article 2A and Article 5 of Chapter 105.

This section also requires that a delivery seller who makes a delivery sale to file with the Secretary a memorandum or a copy of the invoice for every sale no later than the tenth day of each month for the previous month’s delivery sales. The memorandum or invoice shall include the following information:

1. The name, address, telephone number, and e-mail address of the consumer; 
2. The type and the brands of tobacco products subject to the delivery sale; and 
3. The quantity of tobacco products subject to the delivery sale.

To the extent that the delivery seller complies with the reporting requirements under 15 U.S.C. § 376, the delivery seller does not have to file any additional information with the Secretary.

A person who violates this section is subject to a penalty of one thousand dollars ($1,000) for the first offense. For any subsequent offenses, a person is subject to a penalty not to exceed five thousand ($5,000) as determined by the Secretary.

G.S. 105-113.4F does not apply to cigars or sales of tobacco products by retail dealers who purchased tobacco products from licensed distributors or licensed wholesale dealers.

(Effective October 1, 2019; SB 523, s. 4.7.(b), S.L. 2019-169)

This section was rewritten by creating subsection (a) from the existing language of the statute and adding subsection (b). Subsection (b) clarifies the point of taxation for imported cigarettes. The licensed distributor “who first acquires or otherwise handles cigarettes” in North Carolina is liable for the tax under this section. The liability for the tax includes distributors who bring into North Carolina cigarettes made outside of North Carolina and licensed distributors who are the original consignee of cigarettes shipped into North Carolina.

(Effective July 26, 2019; SB 523, s. 4.1.(e), S.L. 2019-169)

This section was amended to clarify that the use tax on cigarettes applies to persons other than licensed distributors who bring non-tax-paid cigarettes into North Carolina.

(Effective March 20, 2019; SB 56, s. 4.1, S.L. 2019-6)

This section was amended clarifying that setting aside cigarettes for interstate business without paying tax applies only to licensed distributors. “Licensed” was added before “distributor” throughout the section.

Subsection (1) was also amended by striking “and” from the statute in its definition of interstate business. This made clear that interstate business could be either:

1. The sale of cigarettes to a nonresident where the cigarettes are delivered by the licensed distributor to the business location of the nonresident purchaser in another state; or 
2. The sale of cigarettes to a nonresident purchaser who has no place of business in North Carolina and who purchases the cigarettes for the purposes of resale not within this state and where the cigarettes are delivered to the purchaser at the business location in North Carolina of the licensed distributor who is also licensed as a distributor under the laws of the state of the nonresident purchaser.

(Effective March 20, 2019; SB 56, s. 4.2, S.L. 2019-6)

This subsection was amended by clarifying that only licensed manufacturers shipping to licensed distributors may request a tax exemption under G.S. 105-113.10. “Licensed” was added before “Distributors” in the catchline and “licensed” wad added before “manufacturer” in the subsection.

This subsection was further amended by clarifying that if the manufacturer was relieved of paying the tax under this subsection, the manufacturer is still required to file reports pursuant to G.S. 105-113.18, which include the reporting of cigarettes sold, shipped, delivered, or otherwise disposed in North Carolina.

(Effective July 26, 2019; SB 523, s. 4.1.(d), S.L. 2019-169)

This subsection was created, without substantive modification, by removing a sentence from subsection (a) and placing it under this new subsection creating organizational consistency within the section. The catchline “Shipping to Retailers” was also added.

(Effective July 26, 2019; SB 523, s. 4.1.(d), S.L. 2019-169)

This subsection was amended clarifying that if the manufacturer was relieved of paying the tax under this subsection, the manufacturer is still required to file reports pursuant to G.S. 105-113.18, which include the reporting of cigarettes sold, shipped, delivered, or otherwise disposed in North Carolina.

(Effective July 26, 2019; SB 523, s. 4.1.(d), S.L. 2019-169)

This subsection was amended ending perpetual licenses for cigarette distributors. These licenses must now be renewed. Any licenses issued on or after January 2, 2020, are in effect until June 30 of the year following the second calendar year after the date of issuance or renewal. A license for each place of business is renewable upon signed application with no renewal license tax, unless applied for after the June 30 expiration date.

(Effective January 01, 2020; SB 523, s. 4.2.(c), S.L. 2019-169)

This subsection was amended requiring that any out-of-state distributors obtaining a distributor’s license must comply with G.S. 105-113.4A.

(Effective January 01, 2020; SB 523, s. 4.2.(c), S.L. 2019-169)

This section was amended clarifying that the Secretary may require a bond or an irrevocable letter only from licensed distributors.

(Effective March 20, 2019; SB 56, s. 4.3, S.L. 2019-6)

This subsection was amended to clarify what information a licensed distributor is required to include in its monthly report to the Secretary. Specifically, the distributor’s report must:

1. Include cigarettes sold, shipped, delivered, or otherwise disposed of in this state; 
2. Include the quantity of all cigarettes transported or caused to be transported into North Carolina by the licensed distributor or licensed manufacturer in the state for sales in this state; 
3. State the amount of tax due; and 
4. Identify any transactions to which the tax does not apply.

(Effective July 26, 2019; SB 523, s. 4.3.(a), S.L. 2019-169)

This subsection was stricken in its entirety. Any activities required to be reported relating to free cigarettes are now otherwise covered by G.S. 105-113.18(1).

(Effective July 26, 2019; SB 523, s. 4.3.(a), S.L. 2019-169)

This section was amended clarifying that only licensed distributors are eligible for discounts or refunds under G.S. 105-113.21.

(Effective July 26, 2019; SB 523, s. 4.1.(c), S.L. 2019-169)

This section was amended clarifying what records needed be kept for cigarettes and other tobacco products pursuant to Article 2A, Chapter 105. Previously, the language provided that records needed to include sales and “other information as required” by Article 2A. The amendment expanded the language to include “purchases, inventories, shipments, and deliveries . . . .”

The section was also amended requiring that these records be open at all times for inspection by the Secretary or the Secretary’s authorized representative.

(Effective July 26, 2019; SB 523, s. 4.4.(a), S.L. 2019-169)

This section was amended clarifying that “possession with the intent to sell cigarettes or other tobacco products” is unlawful unless a person first obtains a license. Previously, the statute was limited to prohibiting the act of selling or offering for sale cigarettes or other tobacco products.

This section was also amended improving readability, without substantive change, by replacing “such” with “the.”

(Effective December 1, 2020, and applies to offenses committed on or after that date; SB 523, s. 4.14.(a)-(b), S.L. 2019-169)

This subdivision was rewritten to be consistent with 21 C.F.R. § 1140.16(d)(2) and its limitations on distribution of samples of tobacco. This amendment exempts from tax “[a] sample tobacco product, other than cigarettes, distributed without charge [if the distribution is] in a ‘qualified adult-only facility’ as that term is defined in 21 C.F.R. § 1140.16(d)(2).”

(Effective July 26, 2019; SB 523, s. 4.5., S.L. 2019-169)

This subsection was amended clarifying that for a manufacturer to be eligible to be relieved of paying tax under G.S. 105-113.35, in addition to the other requirements under this section, it cannot be a retail dealer of either tobacco products or vapor products.

Subsection (d) was further amended to clarify that if the manufacturer was relieved of paying the tax under this section, the manufacturer is still required to file reports pursuant to G.S. 105-113.37.

(Effective July 26, 2019; SB 523, s. 4.5., S.L. 2019-169)

This subsection was amended by clarifying that unless allowed by subsection (d) of this section, a licensed wholesale dealer [cannot] sell, borrow, loan, or exchange non-tax-paid tobacco products other than cigarettes to, from, or with another licensed wholesale dealer, and an integrated wholesale dealers dealer may not sell, borrow, loan, or exchange non-tax-paid tobacco products other than cigarettes to, from, or with other another integrated wholesale dealers.

(Effective July 26, 2019; SB 523, s. 4.5., S.L. 2019-169)

This new section instituted a use tax on tobacco products other than cigarettes to mirror the use tax on cigarettes under G.S. 105-113.6. In conjunction with G.S. 105-113.6, a use tax is now levied against all tobacco products as defined by G.S. 105-113.4(11a).

(Effective retroactive to January 1, 2019; SB 523, s. 4.6.(a)-(b), S.L. 2019-169)

This subsection was created by rearranging existing language from G.S. 105-113.36 and placing it under this new subsection. No substantive changes were made to the existing language other than removing references to a “continuing” license.

(Effective January 01, 2020; SB 523, s. 4.2.(d), S.L. 2019-169)

This subsection was created ending continuing licenses for wholesale dealers and retail dealers for tobacco other than cigarettes. These licenses must now be renewed. Any license issued on or after January 2, 2020, are in effect until June 30 of the year following the second calendar year after the date of issuance or renewal . . . [a] license for each place of business is renewable upon signed application with no renewal license tax, unless applied for after the June 30 expiration date.

Effective January 01, 2020; SB 523, s. 4.2.(d), S.L. 2019-169)

This subsection was created adding a provision allowing for out-of-state wholesale dealers to obtain a license for tobacco products other than cigarettes upon compliance with G.S. 105-113.4A and payment of a tax of twenty-five dollars ($25.00).

(Effective January 01, 2020; SB 523, s. 4.2.(d), S.L. 2019-169)

This subsection was amended clarifying what information a wholesale dealer or retailer dealer is required to include in its monthly report to the Secretary. Specifically, the report must account for all “tobacco products sold, shipped, delivered, or otherwise disposed of in this State.”

(Effective July 26, 2019; SB 523, s. 4.3.(b), S.L. 2019-169)

This subsection was stricken in its entirety. As amended, the wholesaler’s responsibilities regarding exempt sales are otherwise covered by the monthly reporting requirements under G.S. 105-113.37(a).

(Effective July 26, 2019; SB 523, s. 4.3.(b), S.L. 2019-169)

This section was amended to mirror G.S. 105-113.26. Specifically, it requires:

person[s] required to be licensed under this Article shall keep complete and accurate records of . . . purchases, inventories, and sales, shipments, and deliveries of products, and any other information as required under this Article. These records shall be in the form prescribed by the Secretary, open at all times for inspection by the Secretary or an authorized representative of the Secretary, and safely preserved for a period of three years in a manner to ensure their security and accessibility for inspection by the Department (emphasis added noting additional language added to the statute).

(Effective July 26, 2019; SB 523, s. 4.4.(b), S.L. 2019-169)

This subdivision was rewritten to clarify who is a wholesaler and importer for the purposes of reporting and paying tax under Article 2C of Chapter 105. The term now includes:

a resident winery and a wine producer that sells its wines, or wine produced for the permittee under contract, at wholesale to a retailer or at retail and a resident brewery that sells its malt beverages, or malt beverages produced for the permittee under contract, at wholesale to a retailer or at retail.

This subdivision was further amended to clarify that persons who hold any of the following permits issued by the ABC Commission are considered a wholesaler or an importer:

a. Unfortified winery permit under G.S. 18B-1101. 
b. Fortified winery permit under G.S. 18B-1102. 
c. Brewery permit under G.S. 18B-1104. 
d. Wine importer permit under G.S. 18B-1106. 
e. Wine wholesaler permit under G.S. 18B-1107. 
f. Malt beverages importer permit under G.S. 18B-1108. 
g. Malt beverages wholesaler permit under G.S. 18B-1109. 
h. Wine producer permit under G.S. 18B-1114.3.

Previously, the subdivision excluded resident breweries who produced fewer than 25,000 barrels of malt beverages per year. As amended, this subdivision applies regardless of the amount of malt beverages produced.

(Effective July 26, 2019; SB 523, s. 4.8, S.L. 2019-6)

The catchline was rewritten replacing “beer” with “malt beverage.” All changes from beer with malt beverage in this document are consistent with how malt beverage is defined under G.S. 105-113.68 and G.S. 18B-101; a beer is a type of malt beverage.

(Effective March 20, 2019; SB 56, s. 4.4, S.L. 2019-6)

The catchline was rewritten replacing “beer” with “malt beverage.”

(Effective March 20, 2019; SB 56, s. 4.5, S.L. 2019-6)

The catchline was rewritten replacing “beer” with “malt beverage.”

(Effective March 20, 2019; SB 56, s. 4.7, S.L. 2019-6)

The catchline for this subsection was rewritten replacing “beer” with “Malt Beverage.”

(Effective March 20, 2019; SB 56, s. 4.7, S.L. 2019-6)

The subsection added “unless otherwise specified by law” clarifying that the tax on the sale of spirituous liquor is different when spirituous liquor is sold at distilleries. Generally the tax levied under this subsection is the sum of: (1) the distiller’s price; (2) the freight and bailment charges of the State ABC warehouse; and (3) a markup for the local ABC boards. However, in accordance with the G.S. 18B-804(b1), if a distillery permittee sells spirituous liquor distilled at the distillery pursuant to G.S. 18B-1105(a)(4), only the distiller’s price is subject to tax under this subsection.

(Effective March 20, 2019; SB 56, s. 4.7, S.L. 2019-6)

The catchline for this section was rewritten replacing “beer” with “malt beverage.”

(Effective March 20, 2019; SB 56, s. 4.6, S.L. 2019-6)

The catchline for this subsection was rewritten replacing “beer” with “Malt Beverage.”

This subsection was also amended clarifying filing and tax payment requirements for wine shipper permittees. When wine shipper permittees ship wine directly to consumers in North Carolina pursuant to G.S. 18B-1001.1, and the shipment is taxable under G.S. 105-113.80(b), wine shipper permittees must pay the tax and “submit verified reports once a year on forms provided by the Secretary detailing sales records for the year the taxes are paid.” The “report is due on or before the fifteenth day of the first month of the following calendar year.”

(Effective March 20, 2019; SB 56, s. 4.8, S.L. 2019-6)

The catchline for this section was amended by adding “resident wine producer.”

(Effective July 26, 2019; SB 523, s. 4.9, S.L. 2019-6)

This subsection was amended requiring resident wine producers to file monthly reports with the Secretary. This subsection was further amended by clarifying that the reports filed with the Secretary are informational reports, which include non-tax paid sales.

(Effective July 26, 2019; SB 523, s. 4.9, S.L. 2019-6)

This subsection was amended clarifying that resident breweries, resident wineries, resident wine producers, and nonresident vendors must file monthly information reports. These reports must list “the amount of beverages sold, delivered, or shipped to North Carolina wholesalers, importers, and purchasers under G.S. 18B-1001.1 during the period covered by the report.”

(Effective July 26, 2019; SB 523, s. 4.9, S.L. 2019-6)

This subsection was added providing an additional reason that the Secretary may refuse to issue a license and decal, or revoke a license or decal: “[f]ailure to maintain motor vehicle registration on the qualified motor vehicle.”

(Effective June 26, 2019; SB 523, s. 4.10), S.L. 2019-169)

Subsection (8) was amended to align the subsection catchline “Bulk end-user” by adding “bulk” to the definition. The word “facilities” was also struck to encompass all types of bulk storage.

As amended through subsections (33), (48), (48a), and (55), tank wagons for hire are now motor fuel transporters who are subject to licensure and monthly reporting requirements as set out in G.S. §§ 105-449.65 and 105-449.101. Tank wagons, where the motor fuel is owned by the transporter, are not subject to monthly reporting requirements as set out in G.S. §§ 105-449.65 and 105-449.101.

Subsection (51) was also amended to clarify that the definition of terminal applies regardless of whether the terminal has an IRS terminal control number.

(Effective July 26, 2019; SB 523, s. 4.11, S.L. 2019-169)

This section was added and allows (through subsection (a)) the Secretary to issue a temporary license for an applicant to import, export, distribute, or transport motor fuel in response to a disaster declaration as defined in G.S. 166A-19.3. The temporary license expires when the disaster declaration expires.

Subsection (b) provides that an applicant must file the application with the Secretary on a form prescribed by the Secretary within seven calendar days from the date of the disaster declaration. It must include all of the following:

1. The legal name of the business and the trade name, if applicable, under which the person will transact business within the state. 
2. The federal identification number of the business or, if such number is unavailable, the Social Security number of the owner. 
3. The location, with a street number address, of the principal office or place of business and the location where records will be made available for inspection. 
4. Any other information required by the Secretary.

Subsection (c) provides that the Secretary may issue the temporary license without: (1) a bond or a letter of credit otherwise required by G.S. 105-449.72; or (2) the applicant being registered to transact business in North Carolina through the Secretary of State. 

(Effective August 1, 2019 and applying to disaster declarations on or after August 1, 2019; SB 498, s. 2, S.L. 2019-187)

This subsection was amended requiring that a licensee requesting cancellation of the license must immediately return the license to the Secretary. Only a written request by the licensee was previously required.

(Effective March 20, 2019; SB 56, s. 4.11, S.L. 2019-6)

This subsection was amended by changing the method of sending certain documents for license revocations. As amended, the Secretary must send notices for summary license revocations and notices of hearing using certified mail instead of “registered mail”.

(Effective March 20, 2019; SB 56, s. 4.11, S.L. 2019-6)

This subsection was amended clarifying that “[a]n occasional importer is not required to file a return if all the motor fuel imported by the importer in a reporting period was removed at a terminal located in another state and the supplier of the fuel is an elective supplier or a permissive supplier.”

(Effective March 20, 2019; SB 56, s. 4.12, S.L. 2019-6)

This subsection was amended requiring that biodiesel providers “give a shipping document to the person who operates a railroad tank car or a transport truck into which motor fuel is loaded at the terminal rack or bulk plant rack.” Refiners, terminal operators, and fuel alcohol providers are already required to give shipping documents under this subsection.

(Effective July 26, 2019; SB 523, s. 4.12, S.L. 2019-169)

This subdivision was amended adding requirements for certain persons who operate tank wagons. Where motor fuel is loaded into a tank wagon from a source other than a terminal, the operator of the tank wagon must have an invoice, bill of sale, or shipping document that includes “[t]he destination state of the fuel.”

(Effective July 26, 2019; SB 523, s. 4.13, S.L. 2019-169)