Local Sales Tax
Counties can increase their local sales tax by one-quarter of a penny provided that the public approves the increase by referendum. The ballot cannot say how the funds will be used, but the county commissioners can adopt a resolution that stipulates how it plans to use the revenues. In NC, only Durham County has resolved to allocate some of the funds raised through a local sales tax to early childhood education.
How Does it Work?
The local sales tax applies to most of the goods and services currently taxed through the state sales tax with the exception of food purchases local motor vehicle and utility taxes.
Local sales tax options are limited to between 2 percent and 2.75 percent. As of 2015, only two counties have authorized 2.75 percent local sales tax options and a state- approved additional 1⁄4 cent sales tax is available only to a few counties – Mecklenburg, Wake, Guilford, Forsyth, Orange and Durham. Twenty-seven counties have a 2.25 percent local sales tax and 70 counties have a 2 percent local sales tax. Of the 106 referendums proposed from 2009 to 2014 , only 29 passed.
Who Collects it?
The North Carolina Department of Revenue oversees collection of local sales tax revenue.
What is it Used for Now?
By state law, the local sales tax provides general support for the operation of local government services. While counties may not define in law a specific use for the local sales tax (e.g., funds may only be used to fund NC Pre-K expansion), county governments can—and some have—adopted resolutions that identify the purposes for which they seek voter approval to raise the local sales tax. A resolution is a key tool for early childhood advocates to secure a public statement on the use of revenue for early childhood investments.
The local sales tax provides roughly 12 percent of local government’s annual budget.