§ 105-244.2. (Expires January 1, 2010) Reduction of certain sales tax assessments against small businesses. - North Carolina Statutes

§ 105‑244.2.  (ExpiresJanuary 1, 2010) Reduction of certain sales tax assessments against smallbusinesses.

(a)        Reduction. – TheSecretary must reduce an assessment against a small business for State andlocal sales and use taxes and waive any penalties imposed as part of theassessment when the assessment is made as the result of an audit of the smallbusiness by the Department and all of the following apply:

(1)        The gross receiptsof the business for the calendar year preceding the year in which the auditperiod begins, combined with the gross receipts of all related persons asdefined in G.S. 105‑163.010, do not exceed one million eight hundredthousand dollars ($1,800,000).

(2)        The businessremitted to the Department all the sales and use taxes it collected during theaudit period.

(3)        The business had notbeen told by the Department in a prior audit to collect sales and use taxes inthe circumstance that is the basis of the assessment, as reflected in thewritten audit comments of the prior audit.

(4)        The business made agood faith effort to comply with the sales and use tax laws and the assessmentis based on the incorrect application of one of the following complex areas ofthese laws:

a.         The rate of tax thatapplies to prepared food.

b.         The distinctionbetween a retailer and a performance contractor.

c.         The distinctionbetween a service that is necessary to complete the sale of tangible personalproperty, and is therefore taxable, and a service that is incidental to thesale of tangible personal property, and is therefore not taxable.

d.         The determination ofwhether a person is a manufacturer.

(b)        Amount. – Theamount by which a sales and use tax assessment against a small business must bereduced under this section is a percentage of the assessment. The percentage isdetermined by the average monthly gross receipts of the business for thecalendar year for which annual gross receipts are determined under subdivision(a)(1) of this section. A reduction of an assessment under this section and thewaiver of penalties imposed as part of the assessment apply only to the amountof an assessment attributable to the incorrect application of one of thecomplex areas of the law listed in subdivision (a)(4) of this section.

The following table sets outthe applicable percentage reductions of an assessment:

          Average MonthlyGross                         Average Monthly                     Percentage

        Receipts of BusinessOver                   Gross Receipts Up To                  Reduction

                            ‑0‑                                                   $50,000                                   98%

                        $50,000                                              $100,000                                  95%

                       $100,000                                             $150,000                                  90%

(c)        Application. – Thissection applies to the following:

(1)        A proposedassessment that is pending on July 15, 2008.

(2)        An assessment thatbecomes collectible under G.S. 105‑241.22 on or after July 15, 2008.

(3)        An assessment thatmeets all of the following conditions:

a.         It becamecollectible under G.S. 105‑241.22 before July 15, 2008, or was identifiedin a notice of final assessment issued under former G.S. 105‑241.1 beforeJuly 15, 2008.

b.         It is not paid as ofJuly 15, 2008.

c.         If it had been paidwithin six months after it became collectible under G.S. 105‑241.22 orwas identified in a notice of final assessment issued under former G.S. 105‑241.1,a timely claim for refund could be filed under G.S. 105‑241.7 for arefund of the assessment.

(4)        A claim for refundfiled in accordance with G.S. 105‑241.7 for a refund of an assessment.

(d)        Expiration. – Thissection expires January 1, 2010. The expiration applies to an assessment thatbecomes collectible under G.S. 105‑241.22 on or after the expiration dateand to a claim for refund filed on or after the expiration date for a refund ofan assessment paid before the expiration date.  (2008‑107, s. 28.16(b).)