NC Justices Strike Down Lumberton's Sweepstakes Tax

RALEIGH, N.C. (AP) -- The North Carolina Supreme Court says a city crossed the line when it raised special taxes dramatically on businesses that offered electronic sweepstakes machines to its customers.

The court ruled Friday that Lumberton's 2010 decision to raise existing privilege taxes at sweepstakes locations violated the state constitution's provision that taxation be exercised in a "just and equitable manner."

Companies that previously owed $12.50 per year faced taxes of at least $7,500 under the ordinance. Justice Mark Martin wrote the nearly 60,000 percent minimum increase did not even resemble "a just and equitable tax."

Many municipalities approved sweepstakes privilege taxes, in part, to discourage what many called illegal gambling. The Supreme Court in December upheld the legislature's ban on video sweepstakes machines.