A new state sales tax going in effect Jan. 1, 2014, will include a 7.5 percent sales tax on the cost of food on campus for Duke students and on ticket prices for performances, lectures, sporting events and museum visits and add as much as $1 million annually to Duke's financial aid costs.
Legislation passed last session by the N.C. State Legislature and signed by Gov. Pat McCrory cut the state income tax for some residents but also imposed a sales tax on numerous goods and services that previously had been exempted.
Two of the exemptions directly affect Duke University, with the most significant impact expected to come on student food charges and athletic ticket sales.
Food purchased on campus by students had long been free from sales taxes. Beginning Jan. 1, however, both graduate and undergraduate students will be charged a 7.5 percent sales tax on all on-campus food charges paid for with their Food or FLEX points on their Duke Card. The charge reflects a combined state and county sales tax. Students at the Duke Marine Lab in Beaufort will pay a 6.75 percent charge, reflecting the lower county tax there.
Faculty and staff already pay the sales tax for on-campus food purchases and will not be affected by the new charge.
Student meal plans will also be taxed, although their situation is more complicated, said Amy Williams, director of Duke Corporate Tax office. The meal plans charge students a bulk amount at the beginning of the semester and offer a set number of meals for the term. Any unused tax surcharges will be returned to financial aid if the student received a Duke scholarship or grant aid, or transferred to FLEX if the student does not receive aid.
A state legislative study commission met this week in the second of a series of meetings meant to bring clarity to questions about meal plans and other issues raised by the tax's implementation.
Williams said Duke officials currently plan to itemize the cost as a "NC sales tax surcharge" on the meal plan bill at the beginning of the semester. Depending on how many unused meals are left at the end of the term, Duke officials will then reimburse the student by returning a proportional share of the surcharge to the student's Flex account.
The changes will have a significant impact on university financial aid costs, said Alison Rabil, director of Duke's Financial Aid office. Duke doesn't want students receiving aid to take on the burden of the tax and will provide additional grant money to cover it.
Rabil said she expected the additional costs to add between $400,000-$500,000 this spring semester and about $800,000 to $1 million for the 2014-2015 academic year. The university will need to absorb these costs.
The second exemption removed by the legislation is for entertainment tickets, which now will also be subject to the 7.5 percent sales tax in Durham. These include sporting events, performances, on-campus movie tickets and a broader range of activities that may have educational components.
The legislation cited museums specifically, so officials for the Nasher Museum of Art, the Duke Lemur Center, along with Duke Athletics and other campus sites are in the process of determining how to include the tax. Concerts, plays and other events in Page Auditorium, Baldwin Auditorium, Duke Gardens, Wallace Wade, Cameron Indoor Stadium and other venues also are subject to the tax.
Most campus lectures are free, but if tickets are sold, the sales tax may be applied.
"The definition of entertainment is very broad," said Katie Sparrow who attended this week's legislative study session on the tax for the Duke University Health System's Office of Government Relations, which handles state issues for the university and health system. "They are granting very few exemptions."
Duke officials are looking to get more clarification and definition for a myriad of examples that could be affected. But for now, the expectation is that the tax will be applied to nearly all ticket sales, Sparrow said.
For more information about the tax, visit the Duke Student Affairs website.