Sales tax flub may snare businesses

RALEIGH -- State tax officials are scrambling to alert nearly 200,000 businesses how to comply with a sales tax increase that went into effect last month.

Retail businesses began collecting a higher sales tax Sept.1 from shoppers under a tax increase that was passed during the summer as part of the state budget.

But the rush to pass the budget left the N.C. Department of Revenue, which collects the tax, without time to produce new tax forms to reflect the higher tax rate. As a result, businesses in the state were stuck with obsolete tax forms.

The timing couldn't have been worse: All restaurants, mom-and-pop shops, department stores and other retail businesses that charge the sales tax have to file in October to reflect September sales.

Now Revenue Department officials are trying to warn about 180,000 businesses not to use the old tax form without adjusting the tax rate with online worksheets.

"That would be bad," said agency spokesman Thomas Beam. "They'd have to file amended returns. There could be interest on the unpaid amount. More than anything it would be a lot of work."

The state Revenue Department won't distribute correct tax forms until next month. Meanwhile, the agency has created a link to an online worksheet that will calculate the correct sales tax rate. For businesses that don't file online, the Revenue Department's tax technicians will take information by phone and calculate the correct rate.

"It's a hardship and a burden," said Gregg Thompson, the state director of the National Federation of Independent Business, a group with about 7,000 members, mostly small businesses.

Thompson said many small businesses in rural areas don't use the Internet.

He expects long delays for business owners throughout the state trying to get through by phone.

The sales tax increase, expected to raise $803 million in revenue, was part of the state's emergency plan to make up for a gigantic budget shortfall caused by the recession. In most counties the sales tax increased from 6.75 percent to 7.75 percent. In Mecklenburg County it went from 7.25 percent to 8.25 percent.

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