The tangled web: The legislature might be swatting a fly with a sledge hammer if it tries to bring some uniformity to municipal privilege taxes..

When lawmakers passed a sweeping overhaul of the state's tax structure last year, one of their key goals was to make North Carolina more "business friendly." Interestingly enough, they didn't touch the tax that might be causing the most complaints from Tar Heel businesses owners. About 300 of the state's 540 municipalities impose privilege taxes on businesses, forcing them to pay a fee to conduct commerce within their boundaries. It's the wide disparity in how they're applied that has business owners griping.

Some towns and cities charge a flat fee. Some charge more depending on the type or size of the business. Others apply I gross-receipts tax--levied as a percentage of revenue--to certain types of operations. State law, which gives municipalities fairly wide latitude in how to apply the tax, contributes to the disparity. It exempts some businesses, including banks, law firms and medical practices, and caps the amount on others, such as car dealers and building contractors.

Even though only a handful of cities apply the privilege tax on a business' gross receipts, that's what seems to be generating the loudest groans. At a recent hearing before a legislative committee, one business owner compared it to having to pay an additional income tax. Another, Raleigh produce distributor Lynn Ford, related how his company had long paid a flat $100 fee until the city reclassified his business. Now it falls under a gross-receipts tax that approaches $8,000 a year. "The people of North Carolina would never stand for this type of a tax on the state level," he told legislators, "and we shouldn't have to deal with it on a local level either."

Municipal officials aren't crossing their arms and rolling their eyes at these complaints. The Republican-controlled General Assembly has hardly been kind to local government lately. Whether it's Charlotte's airport or Asheville's water supply, legislators have waded into local disputes and thrown their weight against cities. They also have squeezed them when it comes to growth by limiting their annexation powers. Staring that recent history in the face, city and town officials acknowledge some changes are needed. At that same hearing, Paul Meyer, director of governmental affairs for the North Carolina League of Municipalities, conceded that the complaints must be addressed. But he also noted that the privilege tax has become an integral part of how municipalities manage to balance their budgets. "I know," he said...