City sweepstakes tax illegal

Posted March 8, 2013

— Taxes imposed by Lumberton on sweepstakes games were so high that they are unjust, the North Carolina Supreme Court ruled Friday.

 "While the decision to levy a privilege license tax is within the discretion of legislative entities, any tax so levied must be just and equitable," the court wrote.

In 2010, Lumberton's privilege license on sweepstakes operators was $12.50 per business. The city then changed it to $5,000 per business location, plus $2,500 per computer terminal within each business location.

"This change from a flat $12.50 to a $7,500 minimum imposes a 59,900% minimum increase per business location," the court wrote.

Calling the case "hardly nuanced," the court ruled that Lumberton had "transgressed the boundaries of permissible taxation and constituted an abuse of the city‘s tax-levying discretion."

It's unclear what the wider affect of the ruling might be.

In December, the state Supreme Court upheld a ban on sweepstakes businesses imposed by the General Assembly. Since then, some sweepstakes operations have closed of been cited by law enforcement, while others have operated as before with small changes to their machines' software. 

The court takes note of the sweepstakes ban case in its ruling, suggesting that this taxation case may not be very relevant going forward, but ordered the lower courts to deal with the issue of whether taxes collected by Lumberton ought to be returned to the gaming companies.


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