Chamber calls for end to privilege tax
Chapel Hill businesses pay maximum of $300 per year, much less than the tax of other area cities
Published: Mon, May. 21, 2007 12:00AM
Modified Mon, May. 21, 2007 01:20AM
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closeCHAPEL HILL -- The Chapel Hill-Carrboro Chamber of Commerce is renewing the fight against the privilege license tax.
Like other local municipalities, the town of Chapel Hill taxes various enterprises -- such as grocery stores, travel agents and cell phone service providers -- for the privilege of doing business in the town.
Two years ago, the Town Council increased the maximum annual tax to $750 -- far less than in other Triangle communities --but the chamber soon persuaded council members to reduce it to $300.
WHY TAX SHOULD GO
The chamber offered five reasons for repealing the tax:
* The town thrived financially even before instituting the tax in 2000.
* The tax is unfair because it burdens a specific subset of residents.
* The tax applies only to a fraction of businesses; many are exempt.
* The tax is based on gross receipts, rather than profits. "A business could operate at a loss and still pay the maximum taxation rate of $300," the chamber board wrote.
* Businesses already pay their fair share. The chamber board argued that businesses generate property taxes and sales taxes and therefore shouldn't be burdened with the privilege license tax.
SOME DON'T HAVE TO PAY
State statute exempts the following business from municipal privilege license taxes because they already pay business-specific state taxes*:
* Doctors
* Lawyers
* Architects
* Accountants
* Real estate agents
* Utilities
* Banks
* Day care facilities
* Video rental stores
* Photographers
* Chiropractors
* Embalmers
* Appliance and office equipment sellers
*State law also caps the tax for certain businesses, including auto shops and restaurants, most at $100 per year or less.
More Politics
Surrounding communities charge from $2.50 a year for the smallest businesses up to $5,000 a year (Cary), $8,000 (Durham) and $10,000 a year (Raleigh) for some multi-million dollar businesses.
So far this fiscal year, Chapel Hill has collected $127,335 in privilege license taxes from 2,820 businesses.
"It's just part of the structure of how we fund the services that our government provides," Mayor Kevin Foy said.
In a recent letter to Town Council, the chamber's board of directors pointed out that the total revenue is less than the town collects in library fines and represents only one-fifth of a cent on the tax rate, or about 60 cents a year in taxes on a $300,000 house.
Why keep a tax that generates so little revenue?
"You could ask that about any of the ways that we make money," Foy said. "We hardly ever hear from anybody that we shouldn't provide the services that we provide."
Staff writer Jesse James DeConto can be reached at 932-8760 or jesse.deconto@newsobserver.com.
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