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NC Association of County Commissioners <br /> January 30, 2002 <br /> The Third 1/2c;r- Local Option Sales Tax (Article 44) <br /> Introduction <br /> The General Assembly increased the state sales tax by 1/2(Z(to 4.5a)until July 1, 2003 as part <br /> of the biennial budget act(SB 1005). The law authorizes counties to enact a 1/2(Z local option <br /> sales tax when the state tax sunsets to replace state reimbursements which will be eliminated in <br /> state Fiscal Year 2003-04. Following is a summary of the statutory provisions of the new local <br /> sales tax. <br /> Effective Date: Not earlier than July 1, 2003 and any time thereafter. However, counties may <br /> enact the tax prior to that date. <br /> Method of Enactment: Counties may enact the new tax by: 1)resolution of the board of <br /> county commissioners enacted after a public hearing, or 2)by conducting a local referendum. <br /> Allocation of Proceeds: The tax proceeds will be allocated among participating counties as <br /> follows: <br /> 50% on the basis of population <br /> 50%on the basis of point or origin <br /> Distribution Between Counties and Municipalities: The distribution method will be the same <br /> as the method chosen by the county for the distribution of the other local option sales taxes. <br /> Coverage of the Tax: Food purchased for home consumption is exempt from the Article 44 <br /> Sales Tax. <br /> Hold Harmless Provision: The new tax is intended to replace the existing state <br /> reimbursements,which are repealed effective July 1, 2003. In order to assure that no local <br /> government gets less than the amount received from the reimbursements, the new law contains a <br /> 100% "Hold Harmless" requirement. <br /> i Ashared\efthirdsalestax.doc <br />