2023 Excise Tax Law Changes

This section was repealed.

(Effective July 1, 2024, and applies for taxes imposed for taxable years beginning on or after that date; HB 259, s. 42.7.(a), S.L. 2023-134)

This subsection was amended in conjunction with the repeal of privilege taxes on professionals that was previously imposed by G.S. 105-41. The amendment removes reference to “real estate as described G.S. 105-41.” As amended, G.S. 105-88 does not apply to, in part, “the business of negotiating loans on real estate.”

(Effective July 1, 2024; HB 259, s. 42.7.(c), S.L. 2023-134)

This section was amended modifying the definition of cost price and clarifying the definition of vapor product. This section was also amended implementing weight-based taxation for snuff and adding alternative nicotine products as a taxable product under Article 2A.

Cost Price and Vapor Products

Subsection (2) was amended modifying the definition of cost price in two respects. First, mirroring language that was in place prior to its amendment in 2022, cost price is determined “before any discount, rebate, or allowance.” Second, the definition removed reference to calculating the cost price based on “the average of the actual price paid for the item over the 12 calendar months before January 1 of the year in which the sale occurs.” This method of determining cost price was moved to G.S. 105-113.36A(f)(2), which allows, pending additional amendments effective July 1, 2025, the Department to determine the value of tobacco products based on either the cost price of comparable items or by the method removed under this subsection.

Subsection (13a) was amended clarifying that vapor products include, for example, synthetic nicotine. Specifically, vapor products are products that can be used to produce vapor from nicotine, however derived, in a solution.

(Effective April 3, 2023; SB 174, s. 3.1.-3.2.(a), S.L. 2023-12)

Weight-Based Taxation for Snuff and Taxation of Alternative Nicotine Products

The definition of cigar was renumbered from subsection (1b) to subsection (1c).

The definition of cigarette was renumbered from subsection (1c) to a new subsection: (1d).

Subsection (1b) was amended adding a definition for alternative nicotine products. An alternative nicotine product is a

noncombustible product that contains nicotine, whether natural or synthetic, but does not contain tobacco and is intended for human consumption, whether chewed, absorbed, dissolved, ingested, or by other means. This term does not include a vapor product or any product regulated by the United States Food and Drug Administration under Chapter V of the federal Food, Drug, and Cosmetic Act.

Subsection (10d) was added to define snuff. Snuff is “[a] tobacco product consisting of finely cut, ground, or powdered tobacco that is not intended to be smoked.”

Subsection (11a) amended the definition of tobacco product. As amended, a tobacco product is a “cigarette, a cigar, a vapor product, an alternative nicotine product, or any other product that contains tobacco and is intended for inhalation or oral use.”

(Effective July 1, 2025, and applies to sales or purchases occurring on or after that date; HB 259, s. 42.18.(a), S.L. 2023-134)

This subsection was amended by removing the requirement that the Department state on a license whether it was a duplicate or an amended license.

(Effective April 3, 2023; SB 174, s. 3.3., S.L. 2023-12)

This section was amended as a part of implementing the new taxation methodology for snuff and the new tax on alternative nicotine products.

This section was amended by clarifying that, for the purposes of this section, “‘tax increase’ includes a new tax or a change to the methodology for calculating a tax that results in additional tax being due."

(Effective July 1, 2025, and applies to sales or purchases occurring on or after that date; HB 259, s. 42.18.(a), S.L. 2023-134)

This subsection was amended limiting when a delivery seller is required to file documentation regarding a delivery sale. As amended, a delivery seller is only required to file a memorandum or a copy of the invoice for a delivery sale if there is tax due under Article 2A.

(Effective April 3, 2023, and applies to filings due on or after that date for sales made during the previous month; SB 174, s. 3.4.(a), S.L. 2023-12)

This section was amended clarifying the records that must be maintained and changing the record retention period for those records. This section was also subdivided into subsections.

The newly created subsection (a) clarifies that persons required to be licensed under Article 2A must keep complete and accurate records of all purchases, inventories, sales, shipments, and deliveries of tobacco products, and any other information required by the Secretary.

The newly created subsection (b) requires records be maintained for the applicable period of statute of limitations as set forth in Article 9. If the records apply to a transaction not required to be reported in a return, the records shall be kept for three years from the date of the transaction.

(Effective April 3, 2023, and applies to records for transactions occurring on or after that date; SB 174, s. 3.5.(a), S.L. 2023-12)

This section was amended removing licensing requirements for certain distributors who are delivery sellers. Previously, a distributor who is a delivery seller was required to obtain a license for each location from which the distributor ships delivery sales. As amended, a distributor who is a delivery seller must only obtain a license for each location that the distributor receives or stores non-tax-paid cigarettes.

(Effective April 3, 2023; SB 174, s. 3.6., S.L. 2023-12)

This section was amended changing the taxation methodology for snuff and imposing a new tax on alternative nicotine products. It also made conforming changes to what may be used to determine the value of tobacco products when the taxpayer fails to produce satisfactory documentation to the Secretary.

Subdivision (a)(3) was amended taxing snuff at the rate of forty cents (40¢) per ounce and a proportionate rate on all fractional parts of an ounce. The tax must be computed based on the net weight as listed by the manufacturer on the package in accordance with federal law.

Subdivision (a)(4) was added imposing a tax on alternative nicotine products at the rate of ten cents (10¢) per container containing up to 20 units, and at the rate of one-half cent (1/2¢) per unit for any amount in a container containing over 20 units.

Subdivision (a)(5) was added containing the language previously in subsection (3), which imposes a tax on all other tobacco products at the rate of twelve and eight-tenths percent (12.8%) of the cost price.

Subsection (f) clarifies that if a person liable for the tax imposed by Part 3 of Article 2A cannot produce satisfactory documentation, the Secretary may determine a value based on the cost price, weight, count, or volume of comparable items.

(Effective July 1, 2025, and applies to sales or purchases occurring on or after that date; HB 259, s. 42.18.(b), S.L. 2023-134)

This subsection was amended to allow additional discretion to the Secretary in determining the cost price of tobacco products when a taxpayer cannot produce satisfactory documentation. Previously, the Secretary could use the cost price of comparable items. As amended, the Secretary may use either: (1) the cost price of comparable items; or (2) the average of the actual price paid by the person liable for the tax for the item over the 12 calendar months before January 1 of the year in which the sale occurs.

(Effective April 3, 2023; SB 174, s. 3.2.(b), S.L. 2023-12)

This section was amended narrowing the remote sellers who must maintain records under this section. This section was also amended as a part of implementing the new taxation methodology for snuff and the new tax on alternative nicotine products.

Narrowing Remote Sellers Required to Maintain Records

This section was amended requiring only remote sellers required to be licensed to maintain records under this section.

(Effective April 3, 2023; SB 174, s. 3.8.(a), S.L. 2023-12)

Weight-Based Taxation for Snuff and Taxation of Alternative Nicotine Products

Subsection (1) was amended limiting the record keeping requirements for remote sellers. As amended, only as to cigars, must a remote seller maintain “a list, updated annually, showing the cost price paid by the remote seller for each stock keeping unit . . . .” Previously, this was required for all other tobacco products.

Subsection (3) was amended requiring remote sellers to maintain records documenting “the cost price, weight, or count based on the applicable tax imposed of purchases of all tobacco products sold to consumers in this state.”

(Effective July 1, 2025, and applies to sales or purchases occurring on or after that date; HB 259, s. 42.18.(c), S.L. 2023-134)

This subsection was amended narrowing license requirements for retail dealers. This subsection was also amended requiring an Other Tobacco Products License and Vapor License for applicable wholesale dealers and retail dealers. Previously, only one license was required for all tobacco products except for cigarettes.

Narrowing License Requirements for Certain Remote Sellers

This subsection was amended removing licensing requirements for certain retail dealers who are delivery sellers or remote sellers. Previously, a retail dealer who is a delivery seller or remote seller was required to obtain a license for each location from which the retailer dealer ships delivery sales or remote sales. As amended, a retail dealer who is a delivery seller or remote seller must only obtain a license for each location that the retail dealer receives or stores non-tax-paid other tobacco products.

(Effective April 3, 2023; SB 174, s. 3.8.(a), S.L. 2023-12)

Creation of New Licenses for Tobacco Products Subject to Part 3 of Article 2A

This subsection was amended requiring an Other Tobacco Products License and Vapor License for applicable wholesale dealers and retail dealers. Previously, only one license was required for all tobacco products except for cigarettes.

A wholesaler or retailer must obtain an Other Tobacco Products License for all the following locations:

1. Each location where a wholesale dealer makes tobacco products other than vapor products. 
2. Each location where a wholesale dealer or a retail dealer receives or stores non-tax-paid tobacco products other than vapor products. 
3. Each location from where a retail dealer that is a delivery seller or remote seller receives or stores non-tax-paid tobacco products for delivery sales or remote sales of tobacco products other than vapor products.

A wholesaler or retailer must obtain a Vapor Products License for all the following locations:

1. Each location where a wholesale dealer makes vapor products. 
2. Each location where a wholesale dealer or a retail dealer receives or stores non-tax-paid vapor products. 
3. Each location from where a retail dealer that is a delivery seller receives or stores non-tax-paid vapor products for delivery sales.

(Effective July 1, 2024; SB 174, s. 3.8.(b), S.L. 2023-12)

This section was repealed. Session Law 2023-11 further provided that the Department treat any portion of other tobacco product tax collections pursuant to this section, including transfers made to the University Cancer Research Fund by the Department of Revenue from July 2022 through December 31, 2022, as properly dispersed.

(Effective July 1, 2022, and applies retroactively to distributions for collections on or after that date; HB 2, s. 1.1, S.L. 2023-11)

This section was amended clarifying the records that must be maintained and changing the record retention period for those records. This section was also amended clarifying the Secretary’s authority to inspect records.

Specifically, this section was amended clarifying a person required to file a report or return under this Article must keep a record of all documents used to determine information the person provides in a report or return and any other information required by the Secretary to determine the person's alcoholic beverage transactions.

This section was also amended clarifying that the Secretary or his or her designee has the right at any reasonable time to inspect records.

Finally, this section was amended requiring records be maintained for the applicable period of statute of limitations as set forth in Article 9. If the records apply to a transaction not required to be reported in a return, the records shall be kept for three years from the date of the transaction.

(Effective April 3, 2023, and applies to documents required to be kept for transactions occurring on or after that date; SB 174, s. 3.9.(a), S.L. 2023-12)

This section was added as a part of the new tax on interactive sports wagering operators. This section incorporates the definitions from G.S. 18C-901 into Article 2E.

(Effective January 8, 2024, and applies to gross wagering revenue received on or after that date; HB 347, s. 5., S.L. 2023-42)

This section was added as a part of the new tax on interactive sports wagering operators.

Subsection (a) imposes a tax at the rate of eighteen percent (18%) to the gross wagering revenue of the interactive sports wagering operator.

Subsection (b) allows an interactive sports wagering operator to carry forward a negative gross wagering revenue to the return filed for the subsequent month. However, no amount may be carried forward more than 12 months after the month in which the amount carried forward was originally due.

Subsection (c) provides that taxes levied by Article 2E are due when a return is required to be filed. A return is required to be filed monthly and is due by the “twentieth day of the month following the calendar month covered by the return.” It must be in the form prescribed by the Secretary.

Subsection (d) requires a person who is required to file a return under this Article to maintain a record of “all documents used to determine information the person provides in a return” and that the records be open for inspection by the Secretary or an authorized representative of the Secretary. The records must be maintained for the applicable period of statute of limitations as set forth under Article 9.

Subsection (e) allows an interactive sports wagering operator to receive a refund of the tax paid on sports wagers that have been refunded. The interactive sports wagering operator may receive the refund through a credit on a subsequent monthly return.

(Effective January 8, 2024, and applies to gross wagering revenue received on or after that date; HB 347, s. 5., S.L. 2023-42)

This section was added as a part of the new tax on interactive sports wagering operators.

Subsection (a) requires interactive sports wagering operators to register with the Secretary.

Subsection (b) provides that the registration “must be in a form required by the Secretary and include all information requested. If an interactive sports wagering operator fails to register, the Secretary must notify the Lottery Commission of the violation.”

Subsection (c) requires an interactive sports wagering operator to notify the Secretary in writing if the operator changes ownership or stops engaging in the licensed activities authorized under Article 9 of Chapter 18C.

(Effective January 8, 2024, and applies to gross wagering revenue received on or after that date; HB 347, s. 5., S.L. 2023-42)

This section was added as a part of the new tax on interactive sports wagering operators.

This section allows the Secretary to require a bond or irrevocable letter of credit from an interactive sports wagering operator. The amount of the bond or irrevocable letter of credit must be two times the interactive sports wagering operator's expected monthly tax liability under Article 2E. However, the bond may not be less than fifty thousand dollars ($50,000) and may not be more than two million dollars ($2,000,000).

(Effective January 8, 2024, and applies to gross wagering revenue received on or after that date; HB 347, s. 5., S.L. 2023-42)

This section was added as a part of the new tax on interactive sports wagering operators.

This section provides how revenue collected under Article 2E must be distributed. Specifically,

[t]he Secretary may retain the cost of administering this Article, not to exceed five hundred thousand dollars ($500,000) a year, as reimbursement to the Department. The Lottery Commission shall, no later than 20 days after the end of the month, notify the Department of its unreimbursed expenses from administering the provisions of Article 9 of Chapter 18C of the General Statutes from the previous month. The Department shall reimburse the Lottery Commission from the tax revenues collected under this Article no later than the end of the month in which the Department was notified.

The remainder of the net proceeds of the tax collected must be credited in accordance with subsections (1) through (5).

(Effective January 8, 2024, and applies to gross wagering revenue received on or after that date; HB 347, s. 5., S.L. 2023-42)

This section was amended clarifying when a motor carrier is entitled to credit on tax-paid motor fuel or tax-paid alternative fuel.

Specifically, the section was amended by removing reference to a motor carrier being entitled to credit on its quarterly return. Where an intrastate motor carriers do not file quarterly returns, this was removed clarifying that this section is applicable to both intrastate and interstate motor carriers.

This section was also amended clarifying that credit is based not on the date the fuel is purchased but on the date the fuel is placed into the qualified motor vehicle. This, for example, clarifies that to obtain credit for the tax, a motor carrier maintaining bulk storage of tax-paid motor fuel or alternative fuel must substantiate withdrawals into qualified motor vehicles. See 17 NCAC 12A .0202.

(Effective April 3, 2023; SB 174, s. 3.10., S.L. 2023-12)

This section was amended clarifying the due date of returns and when tax is due from motor carriers exempt from filing a return.

Specifically, the section was amended clarifying that tax levied by Article 36B is not due when a motor carrier files a return but due when a quarterly return is due under G.S. 105-449.45.

The section was also amended clarifying that for a motor carrier who is exempt from filing a return under G.S. 105-449.45(b)(2), the tax levied by Article 36B is due when the tax becomes collectible under G.S. 105-241.22.

(Effective April 3, 2023; SB 174, s. 3.11., S.L. 2023-12)

This section was amended clarifying the due date for a quarterly return and clarifying the exemption from filing requirements for intrastate motor carriers.

Subsection (a) was amended clarifying that a quarterly return covers a calendar quarter and is due by the last day of the month following the quarter.

Subdivision (b)(2) of this section was amended clarifying that for a motor carrier to be exempt from filing a return required by this section the motor carrier must be an intrastate motor carrier and operate exclusively in North Carolina.

(Effective April 3, 2023; SB 174, s. 3.12., S.L. 2023-12)

This section was amended clarifying both the records that must be maintained and the record retention period for those records. This section was also subdivided into subsections.

Subsection (a) was added clarifying that interstate motor carriers must maintain records in accordance with the International Fuel Tax Agreement and any other information required by the Secretary. Further, intrastate motor carriers must maintain records to determine the person's motor fuel or alternative fuel transactions and any other information as required by the Secretary. Intrastate motor carriers must maintain their records for four years after the date of the transaction.

Subsection (b) was created from the original language and removes a gender specific reference to the Secretary.

The catchline was also updated to reflect that the statute includes record-keeping requirements.

(Effective April 3, 2023 and applies to records for transactions occurring on or after that date; SB 174, s. 3.13.(a), S.L. 2023-12)

This section was amended extending the grace period to display decals and carry a copy of a motor carrier license to intrastate motor carriers. Previously, this grace period only applied to interstate motor carriers subject to the International Fuel Tax Agreement.

Subsection (a2) was created from existing language from subsection (a1). It was also amended providing that unless provided unless operating under a temporary permit under G.S. 105- 449.49 or operating under the grace period in accordance with subsection (a3) of this section, the motor carrier must carry a copy of its current calendar year license and display current calendar year decal on each side of the vehicle at all times.

Subsection (a3) was added and sets forth the eligibility requirements for the grace period. To be eligible for the grace period, the motor carrier must do all of the following:

1. Hold an active motor carrier license as of December 31 of the preceding calendar year issued by the Department or issued by another jurisdiction pursuant to the International Fuel Tax Agreement. 
2. Submit an application for licensure to the Department on or before December 31 of the preceding year. 
3. Display the previous calendar year's decal issued by the Department or issued by another jurisdiction pursuant to the International Fuel Tax Agreement. 
4. Carry a copy of the previous calendar year's license in the qualified motor vehicle issued by the Department or issued by another jurisdiction.

(Effective April 3, 2023; SB 174, s. 3.14., S.L. 2023-12)

This subsection was amended making conforming changes to the motor fuel refunds that may be subject to a county or city tax. The statute authorizing refund claims for off-highway use of motor fuel was moved from G.S. 105-449.107(a) to G.S. 105-449.106(d). The statutory references were updated to reflect this change.

(Effective April 3, 2023; SB 174, s. 3.15., S.L. 2023-12)

This subsection was amended clarifying the data sources used in calculating the motor fuel excise tax rate.

Subdivision (1) was amended clarifying that the Department use the percentage change in population for the prior calendar year for which the tax applies.

Subdivision (2) was amended clarifying the applicable Consumer Price Index for All Urban Consumers. As amended, the Department must use the “United States city average for energy index contained in the detailed report released in the November prior to the applicable calendar year by the Bureau of Labor Statistics of the United States Department of Labor . . . .” [Emphasis added.]

(Effective retroactively to January 1, 2017; HB 259, s. 42.22.(a), S.L. 2023-134)

This section was amended clarifying the taxation on fuel grade ethanol or biodiesel and clarifying when tax applies for motor fuel transferred within the terminal transfer system without a license.

Subdivision (3b)d. was added imposing the excise tax on fuel grade ethanol or biodiesel if it is removed from the terminal transfer system and is not subject to the federal excise tax imposed by § 4081 of the Internal Revenue Code.

Subsection (5) was amended clarifying that the excise tax is imposed on transfers within the terminal transfer if: (1) it is subject to, upon transfer, to the federal excise tax imposed by section § 4081 of the Internal Revenue Code; or (2) the motor fuel is transferred at a terminal to a person not licensed under Article 36B.

(Effective April 3, 2023; SB 174, s. 3.21., S.L. 2023-12)

This subsection was added creating an additional exemption from the excise tax. As amended, the excise tax on motor fuel does not apply to fuel grade ethanol or biodiesel transferred between terminals within North Carolina, if the fuel grade ethanol or biodiesel is owned by the same licensed supplier.

(Effective April 3, 2023, and applies to transfers occurring on or after that date; SB 174, s. 3.22.(a), S.L. 2023-12)

Subsection (e) was added clarifying that when filing a return, a licensed supplier who is the position holder may take a credit for tax-paid motor fuel in the terminal system.

(Effective April 3, 2023; SB 174, s. 3.16., S.L. 2023-12)

This subsection was amended removing the requirement that a nonprofit organization must have the refund claim signed by the chief executive officer or another officer designated in its charter or bylaws. The person filing on behalf of the nonprofit organization must otherwise be authorized by the organization to file the refund claim.

(Effective April 3, 2023; SB 174, s. 3.17., S.L. 2023-12)

This section was amended changing the record retention period for records to be maintained and clarifying the Secretary’s inspection authority for records.

Subsection (a) was amending requiring records be maintained for the applicable period of statute of limitations as set forth in Article 9. If the records apply to a transaction not required to be reported in a return, the records shall be kept for three years from the date of the transaction.

Subsection (b) was amended clarifying that the Secretary shall have the right at any reasonable time to inspect the records.

(Effective April 3, 2023, and applies to documents required to be kept for transactions occurring on or after that date; SB 174, s. 3.18.(a), S.L. 2023-12)

This subsection was amended changing the record retention period for records required to be maintained and clarifying the Secretary’s inspection authority for records.

Specifically, this section was amended requiring records be maintained for the applicable period of statute of limitations as set forth in Article 9. If the records apply to a transaction not required to be reported in a return, the records shall be kept for three years from the date of the transaction.

This section was also amended by clarifying that the Secretary or a person designated by the Secretary shall have the right at any reasonable time to inspect the records.

(Effective April 3, 2023, and applies to documents required to be kept for transactions occurring on or after that date; SB 174, s. 3.19.(a), S.L. 2023-12)

This subsection was amended changing the record retention period and clarifying the Secretary’s authority to require returns contain certain information and be in a certain form. It also clarified the Secretary’s inspection authority for records.

Specifically, this section was amended requiring that returns be in the form prescribed by, and contain information required by, the Secretary. This section also clarified that the Secretary or a person designated by the Secretary shall have the right at any reasonable time to inspect the records.

This section was also amended requiring records be maintained for the applicable period of statute of limitations as set forth in Article 9.

(Effective April 3, 2023, and applies to documents required to be kept for transactions occurring on or after that date; SB 174, s. 3.20.(a), S.L. 2023-12)