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Question:Written Assignment # 3 - License & Privilege Taxes

Based on the handouts, reading material, lecture notes and any applicable websites, answer the following questions.

1.List the various items that the store sells such as alcohol, tobacco, etc.

2.Determine what Privilege Taxes and/or Licenses are required, if any, for one of the 5 items listed in the Lecture Notes and discuss the appropriate requirement(s). You may choose which particular item you wish to discuss and describe it in detail.

Notes:

Lesson # 3 - License & Privilege Taxes

Lecture Notes

A business decides the type of entity to form, the business activity function, and the product it sells or produces.Our mock business this semester will sell retail products, so our last step before working with our mock company is to determine the type of business licensing to obtain and the business taxes required to pay.

Each retail business may have several different licenses to obtain. Licensing is necessary and is based upon the retail product the business sells.Some businesses are required to obtain a Privilege license which allows the business the "right" or "privilege" to operate in the state. For example, some businesses may be required to obtain a beer and wine license in order to sell those types of products.

Below is a partial list of product examples a business may sell and may need to obtain licensing:

1)Alcohol (Beer and Wine):Apply to State ABC Commission of NC

Off-Premises Malt Beverage Permit

An off-premises malt beverage permit authorizes the retail sale of malt beverages in the manufacturer's original container for consumption off the premises and it authorizes the holder of the permit to ship malt beverages in closed containers to individual purchasers inside and outside the State.The permit fee is $400.

Off-Premises Unfortified Wine Permit

An off-premises unfortified wine permit authorizes the retail sale of unfortified wine in the manufacturer's original container for consumption off the premises and it authorizes the holder of the permit to ship unfortified wine in closed containers to individual purchasers inside and outside the State.The permit fee is $400.

Apply to City/County (Wake Co. Dept. of Revenue)

Any business selling beer and/or wine in Wake County is required to annually purchase a Beer & Wine License from the Wake County Revenue Department. This license must be obtained prior to the sale of these beverages. The license is good for one year and must be renewed prior to April 30 of each year. A monthly penalty will accrue should the license not be renewed during the proper time.

2)Tobacco (Cigarettes, Cigars, Chewing Tobacco, etc.):

The General Store will be required to obtain a Tobacco license for cigarettes and cigars ($25) and a separate Tobacco license for other tobacco products such as chewing tobacco, snuff, etc. ($25). This license is obtained from the NC Department of Revenue and must be displayed at the place of business.

3)Gasoline:

Gasoline does not require any permits or licenses to sell on the store's part. However, there may be building permits required when installing the gasoline pumps and underground tanks. The permits would be procured from the county. The licenses that are required for selling gasoline are actually procured by the gasoline distributor (such as Hess, Kenan, Pope, etc.) from the NC Department of Agriculture. There is a tax due of 34 cents/gallon sold. However, that is paid by the distributor and is included in the price that customers pay at the pump.

4)Grill items (Burgers, Hot Dogs, etc.): Apply to City/County (Wake Co. Dept. of Revenue)

Requirement 8-301.11 Prerequisite for Operation - A person may not operate a food establishment without a valid permit to operate issued by the Regulatory Authority.The business will need to obtain a permit for prepared food from the county health department.

Requirement 8-301.11 Prerequisite for Operation:A person may not operate a food establishment without a valid permit to operate issued by the Regulatory Authority.

ApplicationProcedure 8-302.11 Submission 30 Calendar Days Before Proposed Opening:An applicant shall submit an application for a permit at least 30 calendar days before the date planned for opening a food establishment or the expiration date of the current permit for an existing facility.

Submission 8-302.12 Form of Submission:A person desiring to operate a food establishment shall submit to the Regulatory Authority a written application for a permit on a form provided by the Regulatory Authority. This permit and the latest inspection grade are to be posted in clear view of customers.

5)Nursery items (Produce, Trees grown on property, etc.):

There are no licenses or permits to obtain for the items sold in this section of the store. However, if more than 50% of the store's receipts (income) are from the nursery, then it would require obtaining an Agricultural Certificate from the NC Department of Agriculture and we would need to obtain an Agricultural Exemption Certificate from the NC Department of Revenue.For the purposes of this course, we will NOT exceed 50% of the receipts, thus the aforementioned licenses or permits are not required.

Reading Assignments:

1)Read the textbookPart IX - License and Privilege Taxes, pages 421 - 425, and Part XI - Miscellaneous Taxes, pages 447 - 452, 's 2902, 2903, and 2904.

2)Though not required, it may be to your advantage to begin reading the textbook- Part VII, Sales and Use Taxes - Chapters 16 - 19 (Pages 205 - 314) and review the Technical Bulletins on the NCDOR website:

http://www.dornc.com (Opens in a new window)-This link is the website of the North Carolina Department of Revenue.This agency is responsible for the enforcement of the state tax system.

a)Click on the "Information for Tax Professionals" tab.

b)Click on "Bulletins".

c)Click on "Sales and Use Taxes".

d)Click on "Table of Contents".