GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION LAW 2019-69
HOUSE BILL 537
AN ACT to reduce the alternate highway use tax on vehicle subscriptions.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 105‑187.1 reads as rewritten:
"§ 105‑187.1. Definitions.
(a) The following definitions and the definitions in G.S. 105‑164.3 apply to this Article:
(3) Long‑term lease or
rental. – A lease or rental made under a written agreement to lease or rent
one or more vehicles to the same person for a period of at least 365
continuous days.days and that is not a vehicle subscription.
(3c) Limited possession commitment. – Long‑term lease or rental, short‑term lease or rental, and vehicle subscriptions.
(6) Retailer. – A retailer as
defined in G.S. 105‑164.3 who is engaged in the business of selling,
or renting renting, or offering vehicle subscriptions for motor
(7) Short‑term lease or
rental. – A lease or rental of a motor vehicle or motor vehicles, including
a vehicle sharing service, that is not a long‑term lease or
or a vehicle subscription.
(8) Vehicle sharing service. – A service for which a person pays a membership fee for the right to use a motor vehicle or motor vehicles upon payment of an additional time‑based or mileage‑based fee.
(9) Vehicle subscription. – A written agreement that grants a person the right to use and exchange motor vehicles owned, directly or indirectly, by the person offering the agreement upon payment of a subscription fee, but it does not include a vehicle sharing service. The subscription fee must provide a person exclusive use of an agreed‑upon number of motor vehicles at any given time during the full term of the subscription.
(b) This section does not apply to Chapter 20 of the General Statutes, including the licensing requirements, restrictions, limitations, and prohibitions on unfair methods of competition contained in Article 12 of that Chapter."
"§ 105‑187.5. Alternate tax for
those who rent or
lease motor vehicles.a limited possession commitment.
(a) Election. – A retailer
may elect not to pay the tax imposed by this Article at the rate set in
G.S. 105‑187.3 when applying for a certificate of title for a motor
vehicle purchased by the retailer for
lease or rental a limited
possession commitment. A retailer who makes this election shall pay a tax
on the gross receipts of the lease or rental limited possession
commitment of the vehicle. The portion of a lease or rental limited
possession commitment billing or payment that represents any amount
applicable to the sales price of a service contract as defined in G.S. 105‑164.3
should not be included in the gross receipts subject to the tax imposed by this
Article. The charge must be separately stated on documentation given to the
purchaser at the time the lease or rental agreement limited
possession commitment goes into effect, or on the monthly billing statement
or other documentation given to the purchaser. When a lease or rental contract
limited possession commitment is sold to another retailer, the
seller of the lease or rental contract limited possession commitment should
provide to the purchaser of the lease or rental contract limited
possession commitment the documentation showing that the service contract
and applicable sales taxes were separately stated at the time the lease or
rental limited possession commitment went into effect and the new
retailer must retain the information to support an allocation for tax computed
on the gross receipts subject to highway use tax. Like the tax imposed by
G.S. 105‑187.3, this alternate tax is a tax on the privilege of
using the highways of this State. The tax is imposed on a retailer, but is to
be added to the lease or rental price limited possession commitment of
a motor vehicle and thereby be paid by the person who leases or rents the
vehicle.enters into a limited possession commitment with a retailer.
(b) Rate. – The applicable
rate rates on the gross receipts from the short‑term
lease or rental of a motor vehicle is eight percent (8%) and the tax rate on
the gross receipts from the long‑term lease or rental of a motor vehicle
is three percent (3%). a limited possession commitment are as listed in
this subsection. Gross receipts does not include the amount of any
allowance given for a motor vehicle taken in trade as a partial payment on the lease
or rental price. limited possession commitment. The maximum tax in
G.S. 105‑187.3(a1) on certain motor vehicles applies to a continuous
lease or rental limited possession commitment of such a motor
vehicle to the same person. The applicable tax rates are as follows:
Type of Limited Possession Commitment Tax Rate
Short‑term lease or rental 8%
Vehicle subscription 5%
Long‑term lease or rental 3%
(c) Method. – A retailer who
elects to pay tax on the gross receipts of the
lease or rental limited
possession commitment of a motor vehicle shall make this election when
applying for a certificate of title for the vehicle. To make the election, the
retailer shall complete a form provided by the Division giving information
needed to collect the alternate tax based on gross receipts. Once made, an
election is irrevocable.
(d) Administration. – The
Division shall notify the Secretary of Revenue of a retailer who makes the
election under this section. A retailer who makes this election shall report
and remit to the Secretary the tax on the gross receipts of the
rental limited possession commitment of the motor vehicle. The
Secretary shall administer the tax imposed by this section on gross receipts in
the same manner as the tax levied under G.S. 105‑164.4(a)(2). The
administrative provisions and powers of the Secretary that apply to the tax
levied under G.S. 105‑164.4(a)(2) apply to the tax imposed by this
section. In addition, the Division may request the Secretary to audit a
retailer who elects to pay tax on gross receipts under this section. When the
Secretary conducts an audit at the request of the Division, the Division shall
reimburse the Secretary for the cost of the audit, as determined by the
Secretary. In conducting an audit of a retailer under this section, the
Secretary may audit any sales of motor vehicles made by the retailer."
SECTION 3. G.S. 105‑187.9 reads as rewritten:
"§ 105‑187.9. Disposition of tax proceeds.
(a) Distribution. – Of the taxes collected under this Article at the rate of five percent (5%) and eight percent (8%), the sum of ten million dollars ($10,000,000) shall be credited annually to the Highway Fund, and the remainder shall be credited to the General Fund. Taxes collected under this Article at the rate of three percent (3%) shall be credited to the North Carolina Highway Trust Fund.
SECTION 4. G.S. 105‑550(6) reads as rewritten:
lease or rental. –
A lease or rental that is not a long‑term lease or
rental.Defined in G.S. 105‑187.1."
SECTION 5. G.S. 153A‑156 reads as rewritten:
(e) The following definitions apply in this section:
(1) Short‑term lease or
rental. – Defined in
G.S. 105‑187.1(4).G.S. 105‑187.1.
SECTION 6. This act becomes effective October 1, 2019, and applies to vehicle subscription agreements entered into on or after that date.
In the General Assembly read three times and ratified this the 25th day of June, 2019.
s/ Daniel J. Forest
President of the Senate
s/ Tim Moore
Speaker of the House of Representatives
s/ Roy Cooper
Approved 5:12 p.m. this 1st day of July, 2019