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0 ,~~.. ~~~=- 3~. ae ~ earth ar~[i~a K~- ~~~. ~ti~~~ j;~ ~~:~~ a art eat e~ tats "Traa~ur~r~ xzextatn x. mooRC State and Local Government Tinance Division TRGASUTtGR and the Local Government Commission November 2$, 2005 TO: County and School Board Officials and Certified Public Accountants FROM: T. Vance Holloman, Director Fiscal Management Section SUBJECT: Sales Tax Refunds and Motor Vehicle Property Taxes Sales Tax Refunds _ _ During tb.e 2005 legislative session, the General Assembly tools action to amend G.S. I64.~(c) to delete local school administrative units (LEAs) fiom those governmental entities eligible to receive a sales tax refund. This change is effective during the current fiscal year, so LEAs may claim a refund of sales taxes paid during the fiscal ,year ended June 30, 2005.. However, as G.S_ 164.~(c} is currently written, LEAs can not claim a refund for subsequent years. Action was also taken to require the Department of Revenue to deposit to the State Public School fund each qua~.-ter an amount equal to the one-fourth of the prior year refund of sales taxes paid to LEAs. Effective July 1, 200G, that amount will be equal to the refunds paid far the 2005 fiscal year adjusted by increases or decreases in State sales tax collections. These funds will be distributed to LEAs on the basis of avexage daily membership . We are aware of speculation that G.S. 1G4.~(c) may be amended to permit LEAs to claim refunds for local sales taxes paid. If this change does occur we will inform local officials. The LGC issued Memorandum No. 859 an October 16, 1997 which addresses the circumstances under which sales taxes paid for the construction of school facilities, as well as for the purchase of tangible property, by a .county for a LEA are eligible for a refund of sales tax under G. S. 105-1G4.14(c). At the time~that Memorandum was issued LEAs were not among the governmental units that could claim a sales tax refund. Memorandum No. 859 stated that under the provisions of G. S. 115C-521 and 522 LEAs are responsible fvr the construction of school facilities and the purchase of supplies and materials. The fact that a county might issue a check ira. payment to a vendor for the construction of school facilities or the purchase of tangible property for the LEA does not result in the county assuming responsibility for those tasks. Two provisions of the General Statutes make it possible for a county to assume this responsibility for a local board of education. The first is the authorization under G. S. 153A-158.1 far counties to acquire property for use by a LEA. The second way in which a county can assume this responsibility for a LEA is through an inter-local cooperation agreement between the