Legislators voice confusion, concerns over admissions tax
A little more than two months after the Legislature adjourned, confusion reigns over how to implement certain portions of the tax reform package signed into law.
A legislative study committee debated the definition of a “state attraction” and other issues during its first look at a sales tax on admissions to entertainment events that the N.C. General Assembly enacted this session as part of tax reform.
The Revenue Laws Study Committee appointed a three-person subcommittee to clarify the definition, and answer other questions that have arisen about the law.
Beginning Jan. 1, entertainment venues must levy a 4.75 percent sales tax, plus any applicable local taxes. The tax applies to live performances, movies, museums and cultural sites. The law exempts certain festivals, agricultural fairs, events held at an elementary or secondary school and state attractions.
Which organizations get an exemption and what constitutes a state attraction has caused considerable confusion. Some representatives from the Department of Revenue tried to clarify some of the questions, as well as seek guidance from legislators, during a meeting Tuesday in Raleigh. State attractions include historic sites, museums, zoos, aquariums, and state parks run by the N.C. Department of Cultural Resources and the N.C. Department of Environment and Natural Resources.
The term “state attraction” does not apply to centers for performing arts run by universities and colleges, collegiate sporting events or organizations that receive grants from the North Carolina Arts Council, a state agency.
Committee member Rep. Edgar V. Starnes, R-Caldwell, said fairness was needed, “but I can’t see that they’re all being treated the same way. Help me understand the definition of a state attraction.”
According to one guideline the Department of Revenue presented during the meeting, a state attraction is a physical place supported with state funds. Starnes asked, for example, if the N.C. Symphony performed only in Raleigh and had a permanent building, would it qualify as a state attraction.
Rep. Becky Carney, D-Mecklenburg, asked if a historic building that a municipality had renovated as an arts-presenting place that receives some state money would qualify.
“I guess there’s confusion about why that’s not a state attraction,” Carney said.
About 165 organizations, mostly nonprofit, get N.C. Arts Council grants. Arts organizations statewide and locally have opposed the tax as being too burdensome, particularly for smaller organizations, a view that Carney echoed.
Many of those groups operate with volunteers and sometimes a staff of one or two, she said. “How are they actually going to afford to collect that money by January?”
Carney then asked study committee members if they could delay implementation of the law to allow those groups more time to consider how to collect the admissions tax.
“I would hope that we would consider extending that deadline date before we move forward with this,” Carney said.
Rep. Julia Howard, R-Davie and Forsyth, co-chair of the committee, said the law was in place.
Cindy Averette of the General Assembly’s Research Division, told the committee that there is no way to back up the effective date of the legislation.
Rep. Floyd McKissick, D-Durham and Granville, asked if there was some way to carve out a narrow exemption for smaller, non-profit organizations, and to clarify the definition of a state attraction.
But he said he is hesitant about creating more exemptions to the law. “The more we can keep this a level playing field, the better,” McKissick said.
Averette asked the committee to help the Department of Revenue and give it direction about how to proceed with the law.
Arts North Carolina, a non-profit advocacy organization that has tracked the progress of the legislation, had hoped for a delay in implementation of the sales tax for non-profit groups.
The organization will work with the appointed subcommittee to try and get a delay, said Karen Wells, executive director of Arts North Carolina.
“I didn’t feel we got a setback today,” she said.