Proposed Sales Tax Threatens Self Storage Industry in North Carolina

Posted on Apr 26 2011 - 12:42pm by John Stevens

Typically, self storage has avoided sales tax because it is taxed as real estate, not a service. But that standard is now being threatened in North Carolina as a potential tax on self storage has been introduced to the legislature.  Dubbed the “21st Century Tax Modernization Plan,” Senate Bill 658 would impose a sales tax on self storage rentals in the state.

The bill was introduced on April 19 and referred to the Housing Standing Committee on Finance on April 20. In 2009, North Carolina dodged the threat of a sales tax when senators were contemplating new sources of tax revenue.  The national Self Storage Association (SSA) and the North Carolina Self Storage Association (NCSSA) are in full gear to combat the proposed legislation.  The NCSSA is rallying to get the state’s self storage owners and operators to visit or write to their local representatives to oppose the measure.  The association is also beefing up its money-raising endeavors to amass $20,000 in 2011 to fight the tax initiative.

The bill is being sponsored by Senator Daniel G. Clodfelter (D-Mecklenburg). SSA president and CEO Mike Scanlon sent a letter to Clodfelter urging the removal of self storage and mini-storage from the tax proposal. He argued that it is arbitrary to include only one commercial real estate sector in a bull that targets taxes for services. The self storage industry, he noted, already contributes real estate taxes. He also noted that the tax expense would be passed onto consumers, who may often be from low-income households, single parents, retirees, soldiers and small business owners among others.

In March, Illinois faced a similar battle over sales-tax legislation that would tax self storage as a service. The SSA assisted the Illinois Self Storage Association (ISSA) to fight it. Known as House Bill 3501, it added mini storage to a list of services that could be subject to a 6.25 percent base sales-tax rate. Other services at risk of being included in the legislation include landscaping, pet grooming, and marine services. The bill, sponsored by Republican Dave Winters of Springfield, has since been assigned to the Revenue & Finance Committee.

Sources Used:

“Sales Tax on Self-Storage Introduced in North Carolina Legislature.” Inside Self-Storage. April 25, 2011.

“Illinois Self-Storage Operators Face New Sales-Tax Bill.” Inside Self-Storage. March 2, 2011.