What is the Article 46 local sales tax option?

BY ZACHARY HORNER, News + Record Staff
Posted 2/7/20

Chatham County voters will have a voice next month on deciding whether or not the county will levy a new quarter-cent sales tax. It’s called the Article 46 local option sales tax, and the Chatham County Board of Commissioners voted unanimously in October 2019 to put it on the March primary ballot.

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What is the Article 46 local sales tax option?

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Editor’s note: This is the first of a three-part series examining the proposed local sales tax option on Chatham County’s March 3 ballot. You can find Part 2 here.

Chatham County voters will have a voice next month on deciding whether or not the county will levy a new quarter-cent sales tax.

It’s called the Article 46 local option sales tax, and the Chatham County Board of Commissioners voted unanimously in October 2019 to put it on the March primary ballot. In the first part of our three-part series previewing the vote, we’re going to answer some questions about where the tax comes from, what it’s on and what counties around Chatham have it and do with it.

What is Article 46?

In the 2007 state budget, the N.C. General Assembly enacted a number of stipulations, including giving counties the option to “levy a local sales and use tax at a rate of one-quarter percent.” Article 46 is the section in state law where the rules for this tax are outlined.

So this tax is optional?

No county in North Carolina is required to have an Article 46 tax. The state statute says boards of county commissioners “may, by resolution and after 10 days’ public notice,” put this tax into effect. Currently, 42 of North Carolina’s 100 counties have this levy in effect.

During the November 2018 election, 20 counties had an Article 46 referendum on the ballot. Just four passed: Graham (62.4 percent for), Moore (58.8 percent for), Stanly (50.8 percent for, passed by 368 votes) and Swain (54.3 percent, passed by 445 votes) counties.

What does it tax?

The local option sales tax applies to anything normal sales tax applies to except for unprepared food like groceries or gas purchases. So if you go through a drive-thru for a cheeseburger, it applies there. If you go to Lowe’s Hardware to pick up a hammer and some nails, it applies there. But when you head to Piggly Wiggly for your weekly grocery trip, or stop by a BP to fill your car’s gas tank, you won’t pay this tax.

Chatham County already has a sales tax. Which one is that?

The State of North Carolina has a 4.75 percent sales tax effective statewide. Counties can enact additional sales taxes to generate additional revenue. Currently, Chatham has 2 percent in additional sales tax. If the vote passes in Chatham in March, that 2 percent sales tax would simply increase to 2.25 percent.

Where does Chatham currently rank among surrounding counties? Across North Carolina?

Chatham’s current 6.75 percent sales tax rate is tied for the lowest in North Carolina, along with a majority of North Carolina’s 100 counties. Alamance County is the only neighboring county with a similar rate.

Lee, Moore and Randolph counties have all enacted Article 46 and have 7 percent sales tax rates. Wake County has not enacted Article 46, but has a 7.25 percent rate. Durham and Orange counties, which both have the Article 46 option, have sales tax rates of 7.5 percent.

What would this mean for me as a Chatham County resident?

If you currently ring up a purchase of $5 before sales tax is added, your total cost would be $5.34. If the new option is approved by voters and enacted by the commissioners, that same purchase would now cost you $5.35.

If you ring up a purchase of $22.37, the current total cost with tax would be $23.88. With the new option in place, it would be $23.94.

Another thing to remember: This tax is not just limited to Chatham County residents. Every driver who stops at a fast food restaurant off of U.S. Highway 421 in Siler City, regardless of where they’re from, would be charged this additional quarter-cent tax.

What would this money be used for?

Despite even non-Chathamites paying this tax, the funds go directly into the hands of the Chatham County government to allocate for services.

The Chatham commissioners passed a resolution in October stating they would like the funds to be used for education, agriculture/land banking, affordable housing and parks and recreation purposes. This is by far the most diverse of surrounding counties. Most included school construction or education debt in their resolutions. Orange County allocates half of its revenue for economic development incentives and the other half for public schools capital projects.

Next week, Part 2 will look at the proposed uses for the local option sales tax, if approved.

Reporter Zachary Horner can be reached at zhorner@chathamnr.com or on Twitter at @ZachHornerCNR.


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Melinda Fitzgerald

Zachary, I have concerns about Chatham County's sales tax increasing that I think are not commonly considered or even known within our community. There are multiple opportunities for our county to increase revenue raised by sales tax without actually raising the sales tax. I would love to see the following points flushed out in your three part series so people are fully informed on the issue before voting...

1) Chatham County Sales Tax all too often goes to Orange County - The largest sector of growth in our county is in northern Chatham County with a zip code 27516. Because the 27516 zip code is shared with Orange County, often sales tax collected through online purchases are allocated to the wrong county and Orange County is collecting OUR sales tax. Just think about this the next time you drive through Briar Chapel and see all of those delivery trucks leaving boxes on people's doorsteps. Who's getting that sales tax? Chatham or Orange? Chatham County's website flushes out this issue in detail, but there are still far too few people who know this is a problem. https://www.chathamnc.org/residents/sales-tax-issue-for-residents-and-businesses

2) Residential development is outpacing commercial development - Commercial development brings jobs within our community, encouraging people who live and work in the same community to spend money locally. When people live in a community and work elsewhere (again look to the rapid residential development in northern Chatham where residents are commuting to Chapel Hill, Durham, RTP) shopping often happens outside of the county. Actively promoting economic development so more people can work within the same community they live would boost sales tax revenues by encouraging spending in Chatham. Alyssa Byrd, president of Chatham County Economic Development Corporation has some staggering statistics on how much more revenue commercial development brings to a community over residential development and how rapidly our population is shifting to people commuting out of the county for work.

3) Large ticket retailers have left Chatham - Over the years, Pittsboro has managed to lose every new automobile dealership. Just think about how much sales tax is collected through the sale of a vehicle. The latest loss was the Ford dealership on Thompson Street. The only place to buy a new vehicle in Chatham County now is Welford Harris in Siler City. As part of our economic development, we need to be encouraging businesses to come to Chatham who will generate significant sales tax revenue for our community.

I support all of the initiatives the commissioners are trying to fund. However, I think the source of the funds is all wrong. My heart aches for the extreme poverty in the southern and western portions of our county; folks living paycheck to paycheck. Those are the people hurt most by a sales tax increase. They feel it in the wallet with every purchase. If we would address our zip code issues, support economic development, and attract large ticket retailers to our community, we could more equitably increase revenues to support all.

Friday, February 7

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