Bill
HB 1032
HB 1032 repeals the local grocery tax by removing the food exemption, so groceries would be exempt from local sales taxes starting October 1, 2026.
Title: Repeal Two Percent Local Grocery Tax
Purpose and intent
- The bill seeks to exempt groceries from the local sales and use tax in North Carolina. In effect, it repeals or eliminates the local two percent grocery tax by removing the local tax on food from the statutory framework that allows localities to impose a 1% local sales tax (the bill text references “on items subject to State sales and use tax at the general State rate and on food” and reorganizes related provisions).
Key provisions and changes
1) Local sales tax authorization and ballot language (G.S. 105-465)
- Reframes or clarifies the local option for a 1% local sales and use tax, with the ballot question centered on taxing at the general State rate plus food, or exempting food from that local tax.
- This section underpins the mechanism by which counties could adopt a local sales tax that includes food; HB 1032 effectively aims to render that local portion inapplicable to groceries.
2) Scope of sales tax and food-related taxation (G.S. 105-467)
- Establishes the local sales tax rate framework (1%) and identifies how food purchases are treated for local taxation.
- Reaffirms that food could be taxed at the local level under the existing Article 39 framework, but the bill repeals the food tax component by removing the food-specific exemption/structure (G.S. 105-164.13B is repealed later in the bill).
3) Administration and distribution (G.S. 105-469)
- Details how the Secretary of Revenue would collect and distribute local taxes, including how proceeds from food taxation are allocated among counties (including per-capita and historical allocation methods).
- The bill preserves mechanisms for distribution of local tax proceeds but, by repealing the food exemption, alters how proceeds from local taxes on food would be allocated.
4) Food exemption provisions (G.S. 105-506.2)
- Repeals the statutory exemption for food from the state sales tax (G.S. 105-164.13B). By repealing this exemption, food would no longer be exempt at the state level, aligning with the intent to remove a local food tax component.
5) Administration and applicability (G.S. 105-538)
- Outlines administration rules for adoption and repeal of local taxes and reiterates that, except as provided, these taxes follow Article 39 procedures.
- Explicitly notes that food exemptions or bundling rules apply on the state level; with this bill, the local tax on food would be repealed.
6) Historical distribution provision (Section 9 of Chapter 1096, as amended)
- Provides distribution rules for Mecklenburg County and related jurisdictions, ensuring consistency with existing ad valorem distribution methods; impacts of the bill would adjust allocations if/where local food taxes were previously collected.
Effective date
- The act becomes effective October 1, 2026 and applies to sales made on or after that date.
Who is affected
- Local governments/counties that currently collect a 1% local sales tax that includes food.
- Retailers collecting sales taxes at the local level.
- Consumers, particularly those purchasing groceries, as the local grocery tax would be repealed.
Significant timing and procedural notes
- Effective date: October 1, 2026 (sales on or after this date are affected).
- Repeal of G.S. 105-164.13B (food exemption) aligns state and local tax treatment, potentially simplifying administration but eliminating an existing exemption.
- Revisions interact with existing local ballot-approval processes for local sales tax authorizations.
Bottom line
- HB 1032 aims to abolish the local two percent (1% local rate) component associated with groceries by repealing the state-level exemption for food and reorganizing distributions accordingly. If enacted, groceries would be exempt from local sales taxes starting October 1, 2026, reducing the total tax burden on most grocery purchases at the local level.
Compiled from official sources — confirm details with the bill’s official record.
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