Can the Town of Seven Devils, which straddles two counties, levy a 6% occupancy tax authorized only for 'cities in Avery County'?

Plain-English summary

A Boone attorney asked the AG whether the Town of Seven Devils could levy a 6% occupancy tax. The puzzle was geographic. Seven Devils straddles Avery and Watauga counties. Session Law 2002-94 authorized "cities in Avery County" to levy an additional 3% room occupancy tax on top of the 3% Session Law 2001-439 had already authorized. Watauga County had no occupancy-tax authority of its own.

The AG agreed with the requesting attorney's worry. The legislation likely could not be applied to the entire town in a way that survived constitutional scrutiny.

Two reasons.

First, the grant's scope is doubtful. A grant of taxing power to "cities in Avery County" is ambiguous when applied to a city that lies in two counties. The AG could not find authority either way. One reading: because part of Seven Devils is in Avery County, the whole town qualifies. Another reading: only the portion physically in Avery County qualifies. Two principles cut against the broader reading. Cities and counties have no inherent taxing authority (Hajoca Corp. v. Clayton, 277 N.C. 560 (1971)), so any grant must be strictly construed (Kenny Co. v. Brevard, 217 N.C. 269 (1940)). A tax imposed without authority is illegal (Redevelopment Comm. v. Guilford County, 274 N.C. 585 (1968)). N.C. Gen. Stat. § 160A-206 reinforces the strict-construction rule: "A city shall have power to impose taxes only as specifically authorized by act of the General Assembly."

Second, the uniformity provision. The NC Constitution requires that no class of property be taxed except by uniform rule (art. V, § 2(2)). Uniformity is required throughout the territorial limits of a taxing district (Hajoca). If the tax could only be levied in the Avery County portion of Seven Devils, the tax would be non-uniform within the town's territorial limits and would likely run afoul of the uniformity provision.

The AG cited the example of the neighboring Town of Beech Mountain, which also straddles Avery and Watauga counties. When the legislature granted Beech Mountain occupancy-tax authority, it took deliberate steps: first a specific grant to the town, then a 2001 law dividing the town into two taxing districts (Beech Mountain and Beech Mountain District W in Watauga). The legislature did not take either of those steps for Seven Devils. The Session Law 2002-94 amendment did add "Seven Devils District W" to a list in § 160A-215, but no such municipality actually existed. The AG read that as evidence that the legislature's drafting was confused, not a workable scheme.

The AG's bottom line: clarifying legislation was needed. As Session Law 2002-94 was drafted, the AG could not advise that the tax would survive a court challenge.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The NC General Assembly has authorized many additional local occupancy taxes in the 20+ years since this opinion, often through corrective legislation when prior grants proved problematic. Anyone advising a multi-county municipality on a current occupancy-tax question should pull the current session laws and any amendments to § 160A-215.

Common questions

Q: At the time of the opinion, what was the problem with the Seven Devils occupancy tax?
A: The legislature gave taxing authority to "cities in Avery County." Seven Devils is in both Avery and Watauga counties. The grant did not cleanly cover the Watauga side.

Q: What is the uniformity rule?
A: NC Const. art. V, § 2(2) requires that a class of property be taxed uniformly. A tax that hits one part of the town but not another part is not uniform within the town's territorial limits.

Q: Why did the AG mention Beech Mountain?
A: As a contrast. Beech Mountain has the same two-county problem, and the legislature solved it deliberately: first a specific Town of Beech Mountain grant, then a 2001 law splitting the town into two taxing districts. The legislature did not do either for Seven Devils.

Q: What did the AG recommend?
A: Clarifying legislation. The drafting in Session Law 2002-94 (including a reference to a nonexistent "Seven Devils District W") was the source of the problem and needed a legislative fix.

Background and statutory framework

The two pieces of legislation in play:

• Session Law 2001-439, § 16.2(a). Authorized "cities in Avery County that are not otherwise authorized to levy a room occupancy tax" to levy a 3% tax.
• Session Law 2002-94, § 16.2(a1). Added authority for those cities to levy an additional 3% tax.

The other moving parts:

• Avery County's prior authority. Sess. Law 1993-472 (as amended by Sess. Law 1997-410) had let Avery County levy a 3% tax. That was repealed by Sess. Law 2001-439 § 16.1. So Avery County was out, and "cities in Avery County" stepped in.
• Watauga County. Not authorized to levy a room occupancy tax.
• § 160A-215 amendment. Sess. Law 2002-94 § 4(g) added "Seven Devils District W" to the list of municipalities authorized to levy the tax. No such district existed.
• Beech Mountain pattern. Sess. Law 1987-376 authorized Beech Mountain by name. Sess. Law 2001-434 § 10 split Beech Mountain into the town and Beech Mountain District W (the Watauga portion). Both Beech Mountain examples were clean. Seven Devils was not.

The AG's framework was strict-construction (Hajoca, Kenny, Redevelopment Comm.) plus uniformity (NC Const. art. V, § 2(2)). Either alone would have made the tax constitutionally suspect. Together they made the tax unsalvageable without legislative cleanup.

The opinion was signed by Senior Deputy Attorney General Reginald L. Watkins and Assistant Attorney General Kay Linn Miller Hobart.

Citations

• N.C. Const. art. V, § 2(2) (uniformity of taxation)
• N.C. Gen. Stat. § 160A-206 (cities tax only as specifically authorized)
• N.C. Gen. Stat. § 160A-215 (list of municipalities authorized for occupancy tax)
• Sess. Law 2001-439, § 16.2(a) (3% occupancy tax for Avery County cities)
• Sess. Law 2002-94, § 16.2(a1) and § 4(g) (additional 3% and "Seven Devils District W" list addition)
• Sess. Law 1993-472, Sess. Law 1997-410 (former Avery County authority, repealed)
• Sess. Law 1987-376 (Beech Mountain authority)
• Sess. Law 2001-434, § 10 (Beech Mountain split)
• Hajoca Corp. v. Clayton, 277 N.C. 560 (1971)
• Kenny Co. v. Brevard, 217 N.C. 269 (1940)
• Redevelopment Comm. v. Guilford County, 274 N.C. 585 (1968)

Source

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

Original opinion text

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

23 January 2003

Rebecca Eggers-Gryder
Eggers, Eggers, Eggers, and Eggers
Attorneys and Counselors at Law
Post Office Box 248
Boone, North Carolina 28807

Re: Advisory Opinion: Authority of Town of Seven Devils to Levy an Occupancy Tax; Sess. Law 2002-94

Dear Ms. Eggers-Gryder:

You have requested our opinion as to whether the Town of Seven Devils has authority to levy a total of 6% occupancy tax in Watauga county under Senate Bill 1195, entitled "An Act to Authorize the Towns in Avery County to Levy an Additional 3% Occupancy Tax." A copy of S.B. 1195 (Sess. Law 2002-94) is attached hereto as Exhibit A. For the reasons which follow, we agree with your conclusion that the bill may not, in fact, authorize the levying of the tax throughout the entire town of Seven Devils and may therefore run afoul of the uniformity provision of the North Carolina Constitution.

Section 16.2(a) of Chapter 439 of the 2001 Session Laws authorized certain cities to levy a 3% room occupancy tax. The scope of the grant of authority is as follows: "This section applies only to cities in Avery County that are not otherwise authorized to levy a room occupancy tax." Sess. Law 2001-439, § 16.2(a). We understand that the Town of Seven Devils is located within both Avery and Watauga counties. The Town of Seven Devils is not otherwise authorized to levy an occupancy tax. Sess. Law 2002-94 added a new subsection granting cities that levy the tax under § 16.2(a) authority to levy an additional 3% room occupancy tax. Sess. Law 2002-94, § 16.2(a1).

More specifically, you have inquired whether the legislative grant of authority to "cities in Avery County" is sufficient to include the portion of the town located in Watauga county, and, if not, whether such taxing scheme violates the uniformity provision of the North Carolina Constitution, which provides, in part, that "No class of property shall be taxed except by uniform rule, and every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government." N.C. Const. Art. V, § 2(2).

Uniformity of taxation is required throughout the territorial limits of a taxing district. Hajoca Corp. v. Clayton, 277 N.C. 560, 569 (1971). Here, there is uniformity within the taxing district, the Town of Seven Devils, only if the tax is imposed throughout the town, including that part in Watauga county. If the legislative grant of authority to "cities in Avery County" does not encompass the portion of the town located in Watauga county, the tax would not be uniform throughout the taxing jurisdiction and would appear to run afoul of the uniformity provision.

The question of the extent of the grant of the authority is more difficult. We are aware of no authority supporting or defeating the proposition that a grant of taxing power to a town in a county, expressed in terms of territorial authority to tax, extends to that portion of the town without the county. Arguably, because a portion of the town is "in Avery County," the entire town as a taxing unit would be authorized to levy the tax. This interpretation appears particularly viable in view of the requirement that statutes must be construed in a way that will not offend the constitution.

On the other hand, because cities and counties do not possess inherent authority to levy taxes, see Hajoca, 277 N.C. at 569, any grant of taxing power from the General Assembly must be strictly construed. Kenny Co. v. Brevard, 217 N.C. 269, 272 (1940) ("the powers of municipalities relating to taxation are strictly construed"). At first blush, this principle weighs against a finding that the portion of the town not in Avery county is authorized to levy the tax. Further, a tax imposed without authority is an illegal tax. Redevelopment Comm. v. Guilford County, 274 N.C. 585, 589 (1968).

On balance, we cannot advise that the legislation, if challenged in court, could withstand an argument that the grant of authority to "cities in Avery County" does not extend to that portion of the town in Watauga county. If the grant were found to be limited to that portion of the town in Avery county, such a tax would likely be held to violate the uniformity provision of the Constitution. Our conclusion relates to both the initial 3% tax as well as the additional 3% levy.

As your letter points out, the Town of Beech Mountain is similarly situated to that of Seven Devils, in that it is located in both Avery and Watauga counties. Of particular note is the methods the legislature chose in granting the Town of Beech Mountain taxing authority. Originally, the General Assembly specifically authorized the Town of Beech Mountain to levy an occupancy tax. Sess. Law 1987-376. Later, the legislature divided the town into two taxing districts, the Town of Beech Mountain and Beech Mountain District W (that portion of Beech Mountain located in Watauga county). Sess. Law 2001-434, § 10. Interestingly, the legislature followed neither course of action in Sess. Laws 2001-439 and 2002-94. In light of this variation, we can discern no specific legislative intent to grant the Town of Seven Devils, as such, taxing authority. This conclusion is further reinforced by G.S. § 160A-206, which provides: "A city shall have power to impose taxes only as specifically authorized by act of the General Assembly." (emphasis added). Given the ambiguity of the operative language, we cannot advise that the legislature "specifically authorized" the Town of Seven Devils taxing authority throughout the territorial limits of the city.

We finally observe that the recent legislation amended G.S. § 160A-215 to include "Seven Devils District W" in the list of municipalities that the General Assembly has authorized to levy the tax. Sess. Law 2002-94, § 4(g). The fact that there is no such municipality further confuses the issue. Clarifying legislation may be in order.

We hope the foregoing proves helpful.

Sincerely,

Reginald L. Watkins
Senior Deputy Attorney General

Kay Linn Miller Hobart
Assistant Attorney General

KLMH/sg

Attachment