Loss of privilege license tax cuts deep into Lenoir budget

Jun. 03, 2014 @ 08:25 AM

Lenoir stands to lose roughly $180,000 in annual revenue starting in fiscal 2015-16 because of a law passed Thursday that will end business privilege license taxes.

That would wipe out most of the revenue expected to be generated by a proposed two-cent increase in the property tax rate, City Manager Lane Bailey said.

“It’s going to cost us,” Bailey said. “This year, we have $180,000 budgeted for that – the equivalent of one and a half cents on the tax rate, so if the council does increase taxes two cents, next year we’ll lose one and half of the two-cent increase through the loss of the privilege license.”

The city charges varying amounts of privilege taxes for different types of businesses in the city. Most are in a range from $5 to $100 -- for instance, jewelry stores are charged $35, repair shops are charged $15, and florists are charged $20 -- but some charges go higher -- pawn brokers are charged $275, a manufacturer with more than 200 employees charged $500, and for retail businesses that have sales of more than $1 million a year in gross receipts, the city charges a rate of $.60 per $1,000 in sales, equal to $600 per $1 million.

Legislative leaders and Gov. Pat McCrory have said they will find a way to replace revenue lost by municipalities, as it did for the loss of business inventory taxes.

But the money to make up the lose of inventory taxes wasn't permanent, lasting from 2002 to 2013. Lenoir last payment was $648,904 for fiscal 2012-13.

“The General Assembly says they want to work to try to replace the revenue, but I think they’ll have some other challenges that could get in the way of that in future years, and there’s no guarantee,” Bailey said.

Like other cities, Lenoir also had set a high business privilege license tax for Internet sweepstakes companies -- $2,000 for the first machine and $1,000 for each additional machine. Though the state has banned those games, cities will miss out on the revenue if the games ever become legal again, which Bailey thinks may happen. Sweepstakes companies used to bring the city a total of about $100,000 a year in business privilege license taxes -- one company even paid its $19,000 privilege license tax in cash.