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Rental Vehicle Tax

Reply to: Revenue Section Telephone: (919) 716-6550 Fax: (919) 715-3550

17 January 2002

Commissioner Trudy Wade Guilford Board of County Commissioners 703 W. Main Street Jamestown, North Carolina 27282

RE: Advisory Opinion; N.C.G.S. § 105-551; five-percent (5%) tax on rental vehicles

Dear Commissioner Wade:

The Executive Director of the Piedmont Authority for Regional Transportation, Brent McKinney, has requested our opinion on the question below. Mr. McKinney has asked that we provide our response directly to you. The question posed is:

In pursuance of implementing a tax under the provisions of N.C.G.S. § 105-551, does the Board of County Commissioners have authority to add provisions or amend in any way the request that may come to them from a regional transportation authority to levy the five-percent (5%) tax on rental vehicles?

For the reasons that follow, our answer is no. N.C.G.S. § 105-551(a) provides, in part, that

[t]he board of trustees of an Authority may levy a privilege tax on a retailer who is engaged in the business of leasing or renting U-drive-it vehicles or motorcycles based on the gross receipts derived by the retailer from the short-term lease or rental of those vehicles. The tax rate must be a percentage and may not exceed five percent (5%).

Subsection (b) of N.C.G.S. § 105-551 states that “[t]he board of trustees of an Authority may not levy a tax under this section or increase the tax rate of a tax levied under this section until [three] requirements have been met.” One of those requirements is that “[t]he board of Commissioner Trudy Wade 17 January 2002 Page 2

commissioners of each county included in the territorial jurisdiction of the authority has adopted a resolution approving the levy of the tax or the increase in the tax rate.” N.C.G.S. § 105551(b)(3).

The legislature has granted transportation authorities certain limited authority to levy a special tax for specified purposes. Under the statutory scheme, the authority to levy the tax, as well as to set the rate and the effective date of the tax (within certain statutorily-prescribed limits) and to repeal the tax, is vested in the regional transportation authority. See N.C.G.S. §§ 105-551, 105-552, 105-555. In dealing with this issue, the General Assembly has chosen to place the responsibility for deciding the substantive issues concerning any tax to be levied with the authority. Nevertheless, while the county commissioners have no inherent or independent power to levy taxes, see Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971), and thus have no authority to add provisions or amend in any way the tax to be levied by the authority, the legislature intended that any tax ultimately levied have the approval of the county commissioners. Ideally, this process should be a cooperative effort.

Moreover, the boards of commissioners of each county included in the territorial jurisdiction of the authority are required to approve the tax as proposed by the authority.

N.C.G.S. § 105-551(b)(3). If the boards of commissioners were permitted to amend the tax as proposed or add ad hoc conditions to the levy, this might create untenable situations in those instances where the approval of more than one county was required.

We trust this advisory opinion proves helpful. If we can be of further assistance, please advise.


Reginald L. Watkins Senior Deputy Attorney General

Kay Linn Miller Hobart Assistant Attorney General

cc: Brent McKinney