Privilege License Ordinance Model Administrative Provisions
The following model for the administrative provisions of a local privilege license tax ordinance was prepared by James Stoddard Hayes, while he was a third-year student at The University of North Carolina at Chapel Hill School of Law, and by David M. Lawrence and William A. Campbell, members of the Institute of Government faculty. The model has undergone a careful review within the Institute and by a committee of city attorneys who graciously gave of their time. With the revisions suggested by these reviews, the model ordinance is herein published. The introduction that follows highlights a few of its provisions. (Throughout, the ordinance is cast as if adopted by a city. It is, however, equally suitable for adoption by a county.)
The model makes no effort to suggest the classes of business to be taxed, the rates, or bases of taxation, leaving these decisions to each unit. It does, however, specify the connection with the city or county that must exist before the business is taxable. If the business location is maintained within the unit, or if a person solicits business, picks up or delivers goods, or extends services within the unit, there is a sufficient connection to tax that business or person under the ordinance. In a few instances a business that is located within the city or conducts business within the city under the terms of the ordinance may in fact be conducting an exclusively interstate business and thus be immune from local privilege license taxation under the Commerce Clause of the United States Constitution. The case law on this subject is extensive and complex, and this model makes no effort to define the situations where there may be such a constitutional immunity. Rather, such situations are more properly a matter of administration of the ordinance, where the facts of each situation will determine the outcome.