Local News

Wake and Its Schools Making End Run Around Sales Tax

Posted August 21, 2007

Map Marker  Find News Near Me

— Legal wrangling between the Wake County Board of Education and the county commissioners is costing big bucks − $400,000 by one estimate.

The situation results from a change in state law two years ago, when school systems lost their sales-tax exemptions and began paying on everything they bought.

The Wake school board and the commissioners crafted an end-run strategy to solve the problem and hoped to have an agreement in place by July 1 of this year. They had not been able to work out the details, however, and the county estimates as much as $400,000 has slipped away in the interim.

That changed Tuesday night when the school board approved the plan, closing the loop.

The basic premise is that while schools have to fork over sales tax on anything they buy, from saws and cinder blocks to pens and paper, counties can get refunds of the tax, just as non-profit organizations can.

"The two boards agreed last summer to transfer the ownership of property to the county, so we could save that sales tax," Commissioner Chairman Tony Gurley said.

Those agreements bogged down, however, and tax dollars were lost while Wake County schools pushed forward with construction projects,

“It's sad commentary that the state charges school systems a sales tax, but that's a fact of life,” said school board member Ron Margiotta.

"We estimate by Aug. 31, when the school system starts transferring deeds to us, we will have lost over $400,000. That's money that's gone forever, needlessly, needlessly."

School Superintendent Del Burns said the plan is harder to put in place than it sounds like it would be, however.

"We worked as quickly as we could. It's very complex. We had to address such issues as documentation required for transfer (and) how deep of a title search did we need to look at,” Burns said."

Insurance questions also came up.

The deal has two parts.

In one, the schools become the county's purchasing agent to buy computers and other equipment and supplies that the schools need. The county is the buyer, legally, but the schools have an exclusive right to use the equipment and will handle payments to the sellers. When items are completely paid for, the county will transfer ownership to the schools. The county will appropriate sales-tax rebates it gets to the school system.

In the other part, the schools will transfer property ownership to the county for some schools sites where construction or renovation are going on. The school superintendent has authority to spend up to $100,000 in the county’s name, however, and the purchases will be eligible for sales-tax rebates because the county is the owner.

Those refunds will go to the schools’ building program.

Officials estimate that in the long run, the plan could save taxpayers as much as $14 million.

15 Comments

Please with your WRAL.com account to comment on this story. You also will need a Facebook account to comment.

Oldest First
View all
  • SteamTrain Aug 22, 2007

    IF these taxes had been Federal, I beleive the IRS has ruled that any transaction whose purpose is to avaoid paying taxes, is illegal. While a tax professional might need to weigh in on this, the state might have a similar law...should they choose to enforce it.

    As far as the kids not paying attention, the youngest ones might not notice, but you'd be suprised what the teens notice, but don't comment upon. Those are the ones that will be selling you cars, food, mortgages, etc. in the future...a slippery slope.

  • mvnull Aug 22, 2007

    "It is also not unethical, but rather good business."

    It is probably good business, but it is also unethical. It is little different from the mob laundering money. Someone earlier hit on the solution -- get the law changed.

  • poohperson2000 Aug 22, 2007

    SteamTrain

    How is this setting a bad example for the kids?? Do you think they even care ot pay attention. That idea is just crazy. It is also not unethical, but rather good business.

  • SteamTrain Aug 22, 2007

    Yeah, the schools need the money but I also find this shady dealing to be somewhat over the edge, bordering on unethical. Just because it might be legal is no reason to set such a bad example for the kids.

    If the law is bad, get the law changed to allow school systems to not pay sales taxes.

  • OpinionatedGuy Aug 22, 2007

    Did you notice that Johnston county voted to get more school buses instead of disrupting families by changing the school start time schedules? What a novel concept... Maybe Wake county should take a look at how Johnston county does things and work with the families instead of their bottom line... Mmmm... No year round school, Pays it's taxes and listens to families... What a unique way to run a school system...

  • Not_So_Dumb Aug 22, 2007

    Yet another example of how a county-wide school system is too big and unwieldy. Sure the ride and all the options on the Titanic were nice, but sometimes the ability to change is vital to survival.

  • NoToIllegals Aug 22, 2007

    I do NOT appreciate my posts being deleted.
    Are radical liberals sitting at the WRAL computers?
    Just curious.

    FREE SPEECH, remember?

  • NoToIllegals Aug 22, 2007

    One more comment to add;

    If people would ban together to force government accountable BEFORE tax increases incur, then maybe something can be done before it's too late.

    I for one and tired of handing over MY EARNED MONEY to freeloaders, including illegals. Time for this madness to stop.
    May as well come to my home and rob me. That's a crime and what the government does to us is corrupt and unethical.

    Same thing except BIG BROTHER gets a free pass.

  • WTFmph Aug 22, 2007

    Oh, and before some of you compassionate folks tell me to go back to Tennessee, I would in a heartbeat, except my family's here, brought in by my dad's employment with IBM.

    So you're stuck with me for a while.

    I like the folks here just fine; I HATE the corrupt, theiving, jack-booted government.

  • WTFmph Aug 22, 2007

    When I moved here in 1986 from TN, I thought I would win bets that non-profits were not legally compelled to pay sales tax. It's federally not allowed. I was wised up to the fact that NC makes an end run around the federal regs by forcing non-profits to pay everything in, and file detailed reports to get the money they're entitled to back.

    The first non-profit I worked for, Eastern Star, just paid it and abandoned the money because it was deemed the expense to reclaim it was prohibitive.

    The second non-profit, the YMCA, does spend the time and money to get it back, but it has to employee a full-time person with benefits just to do it. Because the money is big enough, it can justify the expense.

    Nice going, NC, in your own end run around federal regs.

    This is the most corrupt state I've seen. Remember TN has no income tax, comparable sales tax, and much better roads, museums and other services.

More...