Untangling a taxation thicket

Oct. 09, 2013 @ 06:30 PM

In the raucous debate surrounding the Affordable Care Act in our gridlocked nation’s capital, a frequent refrain from its diehard opponents is that it is flawed and difficult to understand.

No amount of counterargument that such a state of affairs is common for major, transformative legislation can dampen that particular angle of attack. Social Security, Medicaid, Medicare – all have required tweaks, sometimes major, in the months and years after their initial enactment.

And it’s not just major spending programs such as those. The No Child Left Behind Act, a signature of the George H. W. Bush presidency (forged with the late Democratic Sen. Ted Kennedy in a show of bipartisanship that seems distant these days) has faced readjustments and repositioning.

So perhaps it’s not surprising that even much less sweeping legislation – a new tax that would superficially seem straightforward – can be launched into an atmosphere of confusion.

That’s the case with the tax revisions championed by the Gov. Pat McCrory and the Republican majority in the last legislative session. With less than three months until some of the new tax provisions kick in, there’s widespread confusion over how they will be implemented.

A legislative study committee is trying to untangle some of that confusion. Meeting in Raleigh Tuesday, the Revenue Laws Study Committee tackled, as one example with impact in Durham, the imposition of the sales tax on entertainment venues.

Beginning Jan. 1, the 4.75 percent state sales tax plus any local sales tax levies must be collected and paid by entertainment venues.

There are exceptions. Some are easily grasped – events at elementary or secondary schools, for example. You won’t be paying sales tax to see Johnny  in the drama club’s spring play or Jenny in the high school orchestra concert.

But a more slippery exemption is for “state attractions.”

What, exactly, qualifies as a state attraction? State parks? That’s easy; of course they are state attractions.  So are state historic sites, museums and zoos.

The law explicitly says that performing arts centers run by state universities and colleges aren’t state attractions; neither are collegiate sporting events.

But what, legislators wondered Tuesday, about a historic building that a town or city has renovated as an arts venue that receives some state money.

Amid the confusion, scores of non-profit arts organizations are seeking exemptions from a tax the collection of which they argue will be unduly burdensome.  But every potential exemption opens questions of fairness and equity in levying the tax.

State Rep. Floyd McKissick of Durham captured the dilemma, asking if smaller nonprofits might be exempt but adding that he’s hesitant to do that. “The more we can keep this a level playing field, the better,” he said.

Tuesday’s discussion was a good reminder that, as with much legislation, the devil is in the details.

We shouldn’t be surprised by that. But we should also expect that the legislature and state agencies will sort this out before tax collection begins.