Showroom tax survives state changes

Jul. 13, 2014 @ 08:37 PM

Like other cities, High Point stands to lose revenue as a result of new state legislation that will eliminate the ability of municipalities to charge businesses privilege license taxes.
But the news could have been a lot worse locally.
High Point’s showroom tax survived the repeal of the privilege license tax system by the N.C. General Assembly last month.
That means the tax that generates revenue for High Point’s semi-annual furniture trade show will continue to be assessed on showrooms, according to Fred Baggett, a former city attorney who works as a lobbyist for the city on state issues.
Baggett and others successfully impressed upon state lawmakers that the showroom tax is independent from the privilege license tax system because it was enacted through special state legislation in 2001.
The tax generates about $1.5 million for the High Point Market Authority.
The privilege license tax system repeal has left High Point and other cities scrambling to make up for lost revenue without raising taxes or cutting services.
The city estimates that it will lose $122,000 in the fiscal year that began July 1, with an additional loss of $683,000 in the 2015-16 budget.
Baggett said no specifics have been offered as far as a replacement revenue source for cities.
“I don’t think there is a plan, just a vague assurance,” he said. “We hope to keep pressuring the Legislature to provide a replacement revenue source. It’s a significant hit for cities without much notice.”
Without a replacement, cities could lose more than $62 million total.
Business leaders, lawmakers and others were pushing for privilege license tax reform because the levies were applied inconsistently, they said. Instead of reform, the Legislature opted for full-scale repeal of the tax, effective July 1, 2015.
In High Point, some businesses pay a flat amount of privilege tax per year, from $2.50 to $2,500. Other businesses are charged based on their volume of sales, up to $5,000 per year.
So far, High Point leaders have not contemplated tax increases or service cuts because of the repeal.