When a regional transportation authority asks a North Carolina county to approve a 5% rental vehicle tax, can the county add provisions or amend the tax before approving it?

Plain-English summary

The Piedmont Authority for Regional Transportation (PART), like other regional transportation authorities created under state law, has limited statutory authority to levy a special tax to fund its operations. One of those taxes is a privilege tax of up to 5% on the gross receipts of retailers in the business of short-term U-drive-it vehicle and motorcycle leasing. Before levying the tax, the authority must obtain a resolution of approval from the board of commissioners of each county in the authority's territorial jurisdiction.

Brent McKinney, PART's executive director, asked through Guilford County Commissioner Trudy Wade whether a county board could add provisions or amend the tax proposal when approving it.

Senior Deputy AG Reginald Watkins and Assistant AG Kay Linn Miller Hobart said no. The statutory scheme places tax design with the authority and tax approval with the counties. Specifically:

• N.C.G.S. § 105-551(a) gives the authority the power to set the tax rate (not to exceed 5%).
• N.C.G.S. § 105-552 sets the effective date and other parameters.
• N.C.G.S. § 105-555 controls repeal.
• N.C.G.S. § 105-551(b)(3) requires county-board approval before the tax can be levied.

That structure assigns the substantive decisions to the authority. The county's role is binary: approve the proposal or decline it.

The AG also invoked the basic constitutional limit on county taxing power. Hajoca Corp. v. Clayton (1971) confirms that counties have no inherent or independent power to tax. Counties can tax only when the legislature has delegated authority. The legislature delegated approval authority, not amendment authority, so counties had nothing to amend with.

The AG flagged a practical concern as well. If counties could each impose ad hoc conditions, then in any multi-county region the authority's tax could end up with different terms in different counties or fail when the conditions imposed by one county conflicted with those imposed by another. The legislative design relied on uniform tax terms approved by each county in the jurisdiction. Permitting amendments would defeat that uniformity.

The opinion encouraged authority-county cooperation. Although counties could not amend the tax unilaterally, they could of course communicate with the authority and seek changes before approval. The statute "ideally" contemplated a cooperative process, with the formal vote reflecting agreement reached through prior consultation.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The regional transportation authority framework and the rental vehicle tax statutes have been amended over the years. Anyone considering current authority-county tax interactions should consult current G.S. §§ 105-551 to 105-555 and any recent legislative changes before relying on this opinion.

Background and statutory framework

Why this tax structure exists. Regional transportation authorities (Triangle Transit Authority, Piedmont Authority for Regional Transportation, etc.) operate across multiple counties and need a funding mechanism that crosses jurisdictional lines. The General Assembly created G.S. §§ 105-551 to 105-555 as a special-purpose taxing toolkit. The tax falls on rental vehicle retailers' gross receipts (paid in practice by customers), with the authority setting the rate and counties signing off.

The two-step approval process. Under G.S. § 105-551(b), the authority proposes the tax (or a rate increase). Each county in the authority's territorial jurisdiction must adopt a resolution approving the levy. Only when every required county has approved can the tax take effect. This gives counties veto power, but not amendment power.

Hajoca v. Clayton and the absence of inherent county taxing authority. Hajoca confirmed the long-standing principle that local governments tax only by legislative grant. Counties cannot tax based on their own resolution; they need a statute. The AG used Hajoca to underscore that the absence of an amendment power in G.S. § 105-551 was not an oversight; counties simply had no source of authority to amend a tax design they did not author.

The multi-county uniformity problem. When an authority serves multiple counties, the tax has to apply uniformly to rental transactions across the region. Letting Guilford add one condition while Forsyth added a different one (and Davidson a third) would either produce inconsistent tax burdens or block the tax outright. The statute solved this by giving counties an up-or-down vote on a uniform proposal.

The "cooperative effort" framing. The AG's reference to the process as "ideally" a cooperative effort suggests that informal negotiation between an authority and its counties before formal approval was both expected and welcome. Counties unhappy with the proposed tax could communicate concerns, and authorities could revise before submission. What counties could not do was unilaterally amend a submitted proposal.

Common questions

Q: Could a county adopt a resolution approving the tax "subject to" certain conditions?

A: Based on the 2002 opinion, no. The county's role was binary: approve or decline. A conditional resolution would amount to amendment, which the statute did not authorize.

Q: What if a county wanted to limit how the authority spent the proceeds?

A: That would be a substantive amendment to the tax program. The opinion did not give counties spending-control authority through their tax-approval vote. Counties wishing to influence spending would need to negotiate with the authority's board, which has the spending authority under its enabling act.

Q: What if all counties agreed to amend in the same way?

A: Even unanimous county-side amendment was not authorized by G.S. § 105-551. The tax design power belonged to the authority. If counties and authority all agreed on a different design, the right move was for the authority to submit a revised proposal that the counties could then approve uniformly.

Q: Could a county tax rental vehicles on its own, separate from the authority?

A: Only if a separate statute delegated that authority to counties. Hajoca v. Clayton confirms counties cannot tax without legislative grant. The opinion did not address whether other state-law sources might support a county-only rental vehicle tax.

Citations

Statutes:
- N.C.G.S. § 105-551 (regional transportation authority privilege tax on U-drive-it vehicles; rate up to 5%; approval requirements)
- N.C.G.S. § 105-552 (rate and effective date authority)
- N.C.G.S. § 105-555 (repeal authority)

Cases:
- Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971) (counties have no inherent taxing power; must rely on legislative delegation)

Source

• Landing page: https://ncdoj.gov/opinions/rental-vehicle-tax/

Original opinion text

Reply to: Revenue Section
Telephone: (919) 716-6550
Fax: (919) 715-3550

17 January 2002

Commissioner Trudy Wade
Guilford Board of County Commissioners
703 W. Main Street
Jamestown, North Carolina 27282

RE: Advisory Opinion; N.C.G.S. § 105-551; five-percent (5%) tax on rental vehicles

Dear Commissioner Wade:

The Executive Director of the Piedmont Authority for Regional Transportation, Brent McKinney, has requested our opinion on the question below. Mr. McKinney has asked that we provide our response directly to you. The question posed is:

In pursuance of implementing a tax under the provisions of N.C.G.S. § 105-551, does the Board of County Commissioners have authority to add provisions or amend in any way the request that may come to them from a regional transportation authority to levy the five-percent (5%) tax on rental vehicles?

For the reasons that follow, our answer is no. N.C.G.S. § 105-551(a) provides, in part, that

[t]he board of trustees of an Authority may levy a privilege tax on a retailer who is engaged in the business of leasing or renting U-drive-it vehicles or motorcycles based on the gross receipts derived by the retailer from the short-term lease or rental of those vehicles. The tax rate must be a percentage and may not exceed five percent (5%).

Subsection (b) of N.C.G.S. § 105-551 states that "[t]he board of trustees of an Authority may not levy a tax under this section or increase the tax rate of a tax levied under this section until [three] requirements have been met." One of those requirements is that "[t]he board of commissioners of each county included in the territorial jurisdiction of the authority has adopted a resolution approving the levy of the tax or the increase in the tax rate." N.C.G.S. § 105-551(b)(3).

The legislature has granted transportation authorities certain limited authority to levy a special tax for specified purposes. Under the statutory scheme, the authority to levy the tax, as well as to set the rate and the effective date of the tax (within certain statutorily-prescribed limits) and to repeal the tax, is vested in the regional transportation authority. See N.C.G.S. §§ 105-551, 105-552, 105-555. In dealing with this issue, the General Assembly has chosen to place the responsibility for deciding the substantive issues concerning any tax to be levied with the authority. Nevertheless, while the county commissioners have no inherent or independent power to levy taxes, see Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971), and thus have no authority to add provisions or amend in any way the tax to be levied by the authority, the legislature intended that any tax ultimately levied have the approval of the county commissioners. Ideally, this process should be a cooperative effort.

Moreover, the boards of commissioners of each county included in the territorial jurisdiction of the authority are required to approve the tax as proposed by the authority. N.C.G.S. § 105-551(b)(3). If the boards of commissioners were permitted to amend the tax as proposed or add ad hoc conditions to the levy, this might create untenable situations in those instances where the approval of more than one county was required.

We trust this advisory opinion proves helpful. If we can be of further assistance, please advise.

Sincerely,

Reginald L. Watkins
Senior Deputy Attorney General

Kay Linn Miller Hobart
Assistant Attorney General

cc: Brent McKinney